Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can you please help me with this questions, the value ones and fill in the blank Fill in the blank options. 1 & 2) dividends/

image text in transcribed

Can you please help me with this questions, the value ones and fill in the blank

Fill in the blank options.

1 & 2)

dividends/ increases in stock prices

3)

Approximate yield formula

4)

0.02/0.05/6.91/9.89/19.31

5)

0.02/0.08/6.91/9.89/13.40

3. Forecasting stock value Understanding the returns from investing When buying stock, you can expect to earn money through future current income (from ) and future capital appreciation (from ). Together, your total earnings from a given investment can be expressed in terms of the approximate yield. This value makes it easier for you to compare investment options. Understanding the Approximate Yield Equation The formula for the approximate yield of an investment can look intimidating, but it's really just a function of three things: (1) average current income, (2) average capital gains, and (3) the average value of the investment. Based on the information in the table, compute each of these values for the two stocks over a 3-year period and enter the values into the bottom half of the table. Stock 1 $1.25 Stock 2 $2.95 $116 $146 $70 $82 Expected average annual dividends (2012-2014) Current stock price Expected future stock price (2014) Average current income (CI) Average capital gains (CG) Average value of the investment (VI) $ $ $ $ $ $ Next, derive the correct formula for approximate yield by correctly arranging these three variables in the equation that follows. Approximate Yield = and the Using this formula, you can see that the approximate yield for Stock 1 is approximate yield for Stock 2 is True or False: If both investments carry the same rate of risk, Stock 1 is a better investment than Stock 2 True False 3. Forecasting stock value Understanding the returns from investing When buying stock, you can expect to earn money through future current income (from ) and future capital appreciation (from ). Together, your total earnings from a given investment can be expressed in terms of the approximate yield. This value makes it easier for you to compare investment options. Understanding the Approximate Yield Equation The formula for the approximate yield of an investment can look intimidating, but it's really just a function of three things: (1) average current income, (2) average capital gains, and (3) the average value of the investment. Based on the information in the table, compute each of these values for the two stocks over a 3-year period and enter the values into the bottom half of the table. Stock 1 $1.25 Stock 2 $2.95 $116 $146 $70 $82 Expected average annual dividends (2012-2014) Current stock price Expected future stock price (2014) Average current income (CI) Average capital gains (CG) Average value of the investment (VI) $ $ $ $ $ $ Next, derive the correct formula for approximate yield by correctly arranging these three variables in the equation that follows. Approximate Yield = and the Using this formula, you can see that the approximate yield for Stock 1 is approximate yield for Stock 2 is True or False: If both investments carry the same rate of risk, Stock 1 is a better investment than Stock 2 True False

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Analysis And Valuation Using Financial Statements Text And Cases

Authors: Krishna G. Palepu, Paul M. Healy, Victor L Bernard

3rd Edition

0324118945, 9780324118940

More Books

Students also viewed these Finance questions

Question

Do you suggest Lisa use a PEO? Why?

Answered: 1 week ago