Financial Economics

(5p) Assume the following historical data for a company Year Price per Share 2015 50,940 2016 47 150 2017 53,840 2018 57750 2019 51,640 Dividends per share 0.720 0.720 0.800 0,880 1,000 Assume that you buy the stock et the end of any given year and sell it at the end of the next year, calculate i. The simple rate of return for each year ii. The continuously compounded returns for each year b) You want to purchase a new apartment and you are willing to pay 3 000 000 kr. If you can invest at 4 % per year and you currently have 900 000 kr, how long will it be before you have enough money to pay cash for this apartment? (3p) c) You are thinking about investing your savings in quite safe governments bonds for the next 5 years. The five-year bond offers a 6.85% interest rate. To take your decision, consider that economists have forecasted one-year government bond rates for the following five years are as follows: (3p) Year 1-year rate) 4.25% 2 5.15% 3 5.50% 4 6.25% 5 7.10% 1 Consider also that you have a liquidity premium of 0% for the first year, 0.25% for the next two years and 0.50% thereafter. Would you be willing to buy the five-year bond at 6.85% interest rate? 1. d) You are saving 12000 at the beginning of each year and with an annual interest rate of 2.25 % how much many do you have after 25 years if the interest rate is compounded yearly 11 how much many do you have after 25 years if the interest rate is compounded monthly (4p)