Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help me with #1, 2, 3 and 8. Thanks! 1,2 1. Ranking investments by expected returns. the approximate yield formula or a financial calculator

Please help me with #1, 2, 3 and 8. Thanks!

image text in transcribed

image text in transcribed

1,2 1. Ranking investments by expected returns. the approximate yield formula or a financial calculator to rank the following investments a. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). b. Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). c. Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity). [03,4 2. Calculating expected return on an investment. An investor is thinking about buying some shares of Health Diagnostics, Inc., at $75 a share. She expects the price of the stock to rise to $115 a share over the next three years. During that time, she also expects to receive annual dividends of \$4 per share. Assuming that the investor's expectations (about the future price of the stock and the dividends that it pays) hold up, what rate of return can the investor expect to earn on this investment? (Hint: Use either the approximate yield formula or a financial calculator to solve this problem.) 33,4 3. Calculating expected return on a stock. The price of Outdoor Designs, Inc. is now $85. The company pays no dividends. Fred Gray expects the price four years from now to be $125 a share. Should Fred buy Outdoor Designs if he wants a 15 percent rate of return? Explain. Calculating and interpreting current yield and yield to maturity. Describe and differentiate between a bond's (a) current yield and (b) yield to maturity. Why are these yield measures important to the bond investor? Find the yield to maturity of a 20year, 9 percent, $1,000 par value bond trading at a price of $850. What's the current yield on this bond

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

ISE Business Accounting

Authors: Frank Wood, Alan Sangster

8th Edition

0273638408, 9780273638407

More Books

Students also viewed these Accounting questions

Question

6.65 Find the probability that z lies between z=-1.48 and z=1.48.

Answered: 1 week ago