Case 2
docx
keyboard_arrow_up
School
Rose State College *
*We aren’t endorsed by this school
Course
2503
Subject
Finance
Date
Apr 3, 2024
Type
docx
Pages
2
Uploaded by MegaClover6095
Case 2
Which index performed the best this year? Last year?
In 2023
, DOW finished the year up 13.7%. IWS finished 2023 up 16.9%.
Source
: DOW: DOW 2023 Performance
Source
: Russell 2000: IWS 2023 Performance
In 2022
, The Russell 2000 finished the year down 21.6% with a 484-point decline, not including dividends on its constituent stocks.
The DOW, in 2022, experienced an 8.8% decline, faring well in comparison to
its peers.
Source
: DOW vs IWS 2022
Which index would you feel most comfortable investing your money into?
I think I would feel more confident investing in the DOW with the performance they had over 2022 and 2023. What kinds of companies are in the Russell 2000 index?
Healthcare, Energy, Financial, Technology, Consumer Goods, Real Estate, Utilities
Russell 2000 Index companies
What would you expect in terms of capital gains from the two different indexes?
They seem to have finished pretty closely to each other. I would expect DOW to do better as they really did well during 2022 which was a tough year
of loss for all the indices. What index is riskier?
I would expect that the Russell would be riskier because although their gains in 2023 were closely aligned Russell they had a significantly higher loss in 2022.
Case 2
Are arithmetic returns more important than geometric returns?
It depends on what you want answered. If you wanted to know “What was your return in an avg. year over a particular?” arithmetic return would be more important. Or “What was your average compound return per year over a particular period?” would be suited more toward the geometric avg. return method.
What kinds of goals are associated with investing in these indexes?
The goal is to achieve capital gains for the investors and profit for the companies that are part of the index.
Which index offers the best dividends?
The DOW dividend in 2023 was at 0.70 every for all four quarters. While IWS dividend was at 0.59, 0.58, 0.39, and 0.49 for the four quarters respectively.
The DOW offers the best dividends.
Source
Yahoo Finance
What is significant about standard deviation? What does it mean to an investor? “
Standard deviation is a statistical measurement of how far a variable, such as an investment’s return, moves above or below its average (mean) return.
An investment with high volatility is considered riskier than an investment with low volatility; the higher the standard deviation, the higher the risk. A traditional bell curve is a good way to visualize the concept of an investment’s returns over an extended period of time”.
Source
: Standard Deviation in Investing
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Documents
Related Questions
Use the following data to answer the questions that follow.
Company
Beta
Savoy Corp.
0.84
Hokie Industries
1.36
Alison Records
1.94
Expo Enterprises
0.49
1.00
S&P 500
a. If the S&P 500 goes up by 20.78 percent, how much should the stocks of Savoy, Hokie, Alison, and Expo change in value?
b. If the stock market drops by 9.67 percent, which one of these stocks should outperform the others? Why?
a. If the S&P 500 goes up by 20.78 percent, the stock of Savoy would change in value by %. (Round to two decimal places.)
arrow_forward
A
arrow_forward
Ta
arrow_forward
Consider the following information on large-company stocks for a period of years.
Large-company stocks
Inflation
Arithmetic
Mean
15.3%
3.5
a. What was the arithmetic average annual return on large-company stocks in nominal
terms? (Do not round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
b. What was the arithmetic average annual return on large-company stocks in real
terms? (Do not round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Answer is complete but not entirely correct.
a.
Nominal return
15.30
%
b.
Real return
11.80
%
arrow_forward
What is likely to be the price of the stock on these financial accounting question?
arrow_forward
On March 9, 2009, the Dow Jones Industrial Average reached a new low. The index closed at 6,547.05, which was down 79.89 that
day.
What was the return (in percent) of the stock market that day? (Negative answer should be indicated by a minus sign. Round your
answer to 2 decimal places.)
Return of stock market
%
arrow_forward
If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company over the past four years:
Year 1
Year 2
Year 3
Year 4
High price
$ 99.70
$ 123.30
$ 132.70
$ 149.33
Low price
74.53
90.64
71.32
117.85
EPS
8.98
10.73
11.81
13.20
Earnings are projected to grow at 9 percent over the next year.
a.
What is your high target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.
What is your low target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
arrow_forward
(Calculating rates of return) The S&P stock index represents a portfolio comprised of 500 large publicly traded companies. On December 24, 2007, the index had a value of 1.410 and on
December 24, 2008, the index was approximately 896. the average dividend paid on the stocks in the index is approximately 5.0 percent of the value of the index at the beginning of the year
what is the rate of return eamed on the S&P index? What is your assessment of the relative riskiness of investing in a single stock such as Google compared to investing in the S&P index (recall
from Chapter 2 that you can purchase mutual funds that mimic the retums of the index)?
The rate of retum eamed on the S&P 500 is (Round to two decimal places)
CITES
arrow_forward
What was the return of the stock market that day ?
arrow_forward
The common stock of Air United, Inc., had annual returns of 15.6 percent, 2.4 percent, -11.8 percent, and 32.9 percent over the last four years, respectively. What is the standard deviation of these returns? Group of answer choices 13.29 percent 14.14 percent 16.50 percent 17.78 percent 19.05 percent show your work please and let me know if we can solve it by financial calculator
arrow_forward
(Calculating rates of return) The S&P stock index represents a portfolio comprised of 500 large publicly traded
companies. On December 24, 2007, the index had a value of 1,410 and on December 24, 2008, the index was
approximately 852. If the average dividend paid on the stocks in the index is approximately 3.5 percent of the
value of the index at the beginning of the year, what is the rate of return earned on the S&P index? What is your
assessment of the relative riskiness of investing in a single stock such as Google compared to investing in
the S&P index (recall from Chapter 2 that you can purchase mutual funds that mimic the returns of the index)?
...
The rate of return earned on the S&P 500 is %. (Round to two decimal places.)
arrow_forward
Help
You have a portfolio with a beta of 1.74. What will be the new portfolio beta if you keep 89 percent of your money in the old portfolio
and 11 percent in a stock with a beta of 0.74?
Note: Do not round intermediate calculation and round your answer to 2 decimal places.
New portfolio beta
arrow_forward
What is the geometric return for cherry Jalopies, lnc. On these financial accounting question?
arrow_forward
(Calculating rates of return) The S&P stock index represents a portfolio comprised of 500 large publicly traded companies. On December 24, 2007, the index had a value of 1,410 and on December 24, 2008, the index was approximately
926.
If the average dividend paid on the stocks in the index is approximately
4.0
percent of the value of the index at the beginning of the year, what is the rate of return earned on the S&P index? What is your assessment of the relative riskiness of investing in a single stock such as Google compared to investing in the S&P index (recall from Chapter 2 that you can purchase mutual funds that mimic the returns of the index)?
Question content area bottom
Part 1
The rate of return earned on the S&P 500 is
enter your response here%.
(Round to two decimal places.)
arrow_forward
Using the data in the table:,
a. What was the average annual return of Microsoft stock from 2005-2017?
b. What was the annual volatility for Microsoft stock from 2005-2017?
a. What was the average annual return of Microsoft stock from 2005-2017?
The average annual return is %. (Round to two decimal places.)
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Realized Return for the S&P 500, Microsoft, and Treasury Bills, 2005-2017
S&P 500
Realized
Return
Microsoft
Realized
Return
Dividends
Paid*
Year End
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
S&P 500
Index
1211.92
1248.29
3.00%
4.80%
1418.30
1468.36
903.25
4.70%
1.50%
0.10%
0.10%
1115.10
1257.64
1257.61
0.00%
1426.19
0.10%
1848.36
0.00%
0.00%
2058.90
2043.94
0.00%
0.20%
2238.83
2673.61
0.80%
*Total dividends paid by the 500 stocks in the portfolio, based on the number of shares of
each stock in the index, adjusted until the end of the year, assuming they were…
arrow_forward
If you look at stock prices over any year, you will find a high and low stock price for the
year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for
each year. We can use these ratios to calculate a high and a low stock price for the next
year. Suppose we have the following information on a particular company:
High
price
Low price
EPS
Year 1
$89.09
70.61
6.58
Year 1
Year 2
Year 3
Year 4
Year 2
$103.03
84.91
9.00
High PE
Earnings are projected to grow at 8 percent over the next year.
What are the high and low PE ratios for each year? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
Year 3
$124.81
77.87
8.66
Low PE
Year 4
$136.36
112.34
10.25
arrow_forward
Brielle financial services reports solve this question?
arrow_forward
If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio,
we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year.
Suppose we have the following information on a particular company:
High price.
Low price
EPS
Year 1
$ 86.77
69.09
6.50
Year 2 Year 3
$97.67 $118.97
81.47
8.92
82.11
8.58
Year 4
$130.84
108.02
10.17
Earnings are expected to grow at 8 percent over the next year.
a. What is the high target stock price over the next year?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
b. What is the low target stock price over the next year?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
> Answer is complete but not entirely correct.
a. High target price
$ 136.23
b. Low target price
$ 101.58
arrow_forward
I want to correct answer general accounting question
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you

Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub

EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT

Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Related Questions
- Use the following data to answer the questions that follow. Company Beta Savoy Corp. 0.84 Hokie Industries 1.36 Alison Records 1.94 Expo Enterprises 0.49 1.00 S&P 500 a. If the S&P 500 goes up by 20.78 percent, how much should the stocks of Savoy, Hokie, Alison, and Expo change in value? b. If the stock market drops by 9.67 percent, which one of these stocks should outperform the others? Why? a. If the S&P 500 goes up by 20.78 percent, the stock of Savoy would change in value by %. (Round to two decimal places.)arrow_forwardAarrow_forwardTaarrow_forward
- Consider the following information on large-company stocks for a period of years. Large-company stocks Inflation Arithmetic Mean 15.3% 3.5 a. What was the arithmetic average annual return on large-company stocks in nominal terms? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. What was the arithmetic average annual return on large-company stocks in real terms? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. a. Nominal return 15.30 % b. Real return 11.80 %arrow_forwardWhat is likely to be the price of the stock on these financial accounting question?arrow_forwardOn March 9, 2009, the Dow Jones Industrial Average reached a new low. The index closed at 6,547.05, which was down 79.89 that day. What was the return (in percent) of the stock market that day? (Negative answer should be indicated by a minus sign. Round your answer to 2 decimal places.) Return of stock market %arrow_forward
- If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company over the past four years: Year 1 Year 2 Year 3 Year 4 High price $ 99.70 $ 123.30 $ 132.70 $ 149.33 Low price 74.53 90.64 71.32 117.85 EPS 8.98 10.73 11.81 13.20 Earnings are projected to grow at 9 percent over the next year. a. What is your high target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is your low target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)arrow_forward(Calculating rates of return) The S&P stock index represents a portfolio comprised of 500 large publicly traded companies. On December 24, 2007, the index had a value of 1.410 and on December 24, 2008, the index was approximately 896. the average dividend paid on the stocks in the index is approximately 5.0 percent of the value of the index at the beginning of the year what is the rate of return eamed on the S&P index? What is your assessment of the relative riskiness of investing in a single stock such as Google compared to investing in the S&P index (recall from Chapter 2 that you can purchase mutual funds that mimic the retums of the index)? The rate of retum eamed on the S&P 500 is (Round to two decimal places) CITESarrow_forwardWhat was the return of the stock market that day ?arrow_forward
- The common stock of Air United, Inc., had annual returns of 15.6 percent, 2.4 percent, -11.8 percent, and 32.9 percent over the last four years, respectively. What is the standard deviation of these returns? Group of answer choices 13.29 percent 14.14 percent 16.50 percent 17.78 percent 19.05 percent show your work please and let me know if we can solve it by financial calculatorarrow_forward(Calculating rates of return) The S&P stock index represents a portfolio comprised of 500 large publicly traded companies. On December 24, 2007, the index had a value of 1,410 and on December 24, 2008, the index was approximately 852. If the average dividend paid on the stocks in the index is approximately 3.5 percent of the value of the index at the beginning of the year, what is the rate of return earned on the S&P index? What is your assessment of the relative riskiness of investing in a single stock such as Google compared to investing in the S&P index (recall from Chapter 2 that you can purchase mutual funds that mimic the returns of the index)? ... The rate of return earned on the S&P 500 is %. (Round to two decimal places.)arrow_forwardHelp You have a portfolio with a beta of 1.74. What will be the new portfolio beta if you keep 89 percent of your money in the old portfolio and 11 percent in a stock with a beta of 0.74? Note: Do not round intermediate calculation and round your answer to 2 decimal places. New portfolio betaarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTEssentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning

Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub

EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT

Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning