Problems to work through 1. Explain the components of total return. 2. 3. You bought a share of AAPL for $200 in August last year. Over the past year it paid a quarterly dividend of $0.75. Today, its trading at $440. What is your holding period return? What is your capital gains yield? Your dividend yield? What are the geometric and arithmetic rates of return on the following portfolio? Price Dividend 2015 100 4 2016 110 4 2017 2018 95 4 90 4 4. Suppose the real interest rate is 3% per year, and the expected inflation rate is 5%. What is the nominal interest rate? Suppose expected inflation rises to 6%, but the real rate is unchanged. What must happen to the nominal interest rate? Explain. Describe the following terms in your own words: Holding Period Return (Total Return), APR versus EAR, Real and Nominal rates of return, The Fisher Equation 5