For items 3-5, you are given the following date on Coca-Cola stock. These are beginning of the year prices that have already been adjusted for dividends.

Date Adj Close

1/3/2011 61.53

1/4/2010 51.49

1/2/2009 39.18

1/2/2008 52.59

1/3/2007 41.61

1/3/2006 34.97

1/3/2005 34.16

1/2/2004 39.66

1/2/2003 31.94

1/2/2002 33.98

1/2/2001 44.54

3. Compute the holding period returns for each year from 2001 to 2010.

4. Compute the arithmetic mean return.

5. Compute the geometric mean return.

6. You forecast the one-year return to ABC stock will be 17% if the economy is very good, 6% if the economy is fair, and -3% if there is a recession. Economists predict the probability of a very good economy is 0.05, and the probability of a recession is 0.3. What is the expected return to ABC?

Use the following information to answer items 10-15:

XYZ, Inc. stock had the following stock prices and dividends paid at the end of these years:

Year-End Price Dividend Paid Holding Period Return

2000 9.90 ----- -----

2001 10 0.04

2002 10.5 0.04

2003 10 0.05

2004 10.25 0.05

You bought the stock at year-end 2000

7. Compute the holding period returns for each year for XYZ.

8. Compute the holding period return for the full time period.

9. Compute the arithmetic mean annual return for XYZ.

10. Compute the geometric mean annual return for XYZ.

11. Compute the time-weighted IRR for XYZ.

12. You bought 100 shares at year end 2010. You also bought 100 shares at year-end 2002. What is your dollar weighted IRR?

13. The ABC, Inc. bond matures in 25 years, has a coupon rate= 5.5%, and is presently priced at 97.5% of par.

a. What is the bonds yield to maturity?

b. What is this bonds current yield?

14. The Zombo, Inc. bond matures in 14 years, has a coupon rate= 4.75%. The required rate of return= 6%.

a. What is the bonds price?

b. Is this a premium or discount?