Problem Set #1 1. Given the information below answer the following questions: $ Dividend per share Market Price when Dividend Received 25 Date 3/31 6/30 9/30 12/31 0.2 0.2 0.2 0.2 23 28 29 a. b. C. Calculate the time-weighted rate of return. How does your answer compare to the standard unadjusted holding period rate of return? Calculate the after-tax, time-weighted return given a dividend tax rate of 15% and a capital gains tax rate of 20%. d. How does your answer compare to the standard after-tax unadjusted holding period rate of return using the same tax rates? 2. Answer the following questions given the information in the table below Annual Inflation Rate 2% 1% 4% 3% Return on Stock A 5% 10% 15% 20% Return on Stock B 2% 13% 17% 12% a. Calculate the inflation adjusted returns for Stock A and Stock B (the real return) b. Calculate the sample standard deviation, the arithmetic average return and the geometric average return for both stocks Compute the weights that will that will result in the minimum variance portfolio from combining Stock A and Stock B, given a correlation of 0.688. Calculate the portfolio standard deviation and expected return for a portfolio that invests 40% in A and 60% in B, given a correlation of 0.688. c. d