An investor buys a stock on margin. Assume that Interest on the loan and the dividend are both paid at the end of the holding period. The data related to the transaction are as follows: Number of Shares Purchase price per share Leverage ratio Commission Position holding perlod Sale price per share Call money rate Dividend 200 $15 $0.05/share 6 months $20 5% per year $0.50/share The investor's total return on this investment over the margin holding period is closest to:

An investor buys a stock on margin. Assume that Interest on the loan and the dividend are both paid at the end of the holding period. The data related to the transaction are as follows: Number of Shares Purchase price per share Leverage ratio Commission Position holding perlod Sale price per share Call money rate Dividend 200 $15 $0.05/share 6 months $20 5% per year $0.50/share The investor's total return on this investment over the margin holding period is closest to:

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Calculate the total cost (in $), proceeds (in $), total gain (or loss) (in $), and return on investment for the mutual fund investment. The offer price is the purchase price of the shares, and the net asset value is the price at which the shares were later sold. (Round your return on investment to one decimal place.) Shares OfferPrice TotalCost Net AssetValue Proceeds Per ShareDividends Total Gain(or Loss) Return onInvestment% 500 $10.60 $ $12.80 $ $0.65 $ %
Return on Common Stock You buy a share of The Ludwig Corporation stock for $23.70. You expect it to pay dividends of $1.10, $1.1715, and $1.2476 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $28.63 at the end of 3 years. Calculate the growth rate in dividends. Round your answer to two decimal places. % Calculate the expected dividend yield. Round your answer to two decimal places. % Assuming that the calculated growth rate is expected to continue, you can add the dividend yield to the expected growth rate to obtain the expected total rate of return. What is this stock's expected total rate of return (assume market is in equilibrium with the required rate of return equal to the expected return)? Do not round intermediate calculations. Round your answer to two decimal places. %
An investor buys 300 shares of stock selling at $66 per share using a margin of 66%. The stock pays annual dividends of $1.00 per share. A margin loan can be obtained at an annual interest cost of 302 %. Determine what return on invested capital the investor will realize if the price of the stock increases to $88 within six months. What is the annualized rate of return on this transaction? Question content area bottom Part 1 If the price of the stock increases to $88 within six months, the six-month return on this transaction is .......................%. (Round to two decimal places.)
The preferred stock of PAY Inc. pays an annual dividend of $3.75 and sells for $47.80 a share. What is the rate of return on this security?
An investor buys shares in a mutual fund for $22. At the end of the year the fund distributes a dividend of $0.52, and after the distribution the net asset value of a share is $24.85. What is the investor's percentage return on the investment? Round your answer to two decimal places. 1
You are considering purchasing a share of preferred stock with the following characteristics: par value = $100 dividend rate = 12% per year payment schedule = quarterly maturity date = required rate of return = 6% per year current market price = $135 per share Based on this information, answer the following: A. What is the dollar amount of the quarterly dividend on this stock? B. Using the Discounted Cash Flow Method, what is the dollar value of this stock? C. Using the Discounted Cash Flow Method, what is the annual expected return for this stock? D. Based on your answer to part B, should you invest in the stock? Why or why not? E.…
Assume that a firm can issue preferred stock that has a $70 par value and pays a 15.0% annual dividend each year. The firm's investment bankers believe that investors will be willing to pay $84.00 per share and that flotation costs will be equal to $9.97 per share. Given this information, determine the difference between the investor's required rate of return, and the firm's cost of preferred stock. 2.541% O 2.224% O 1.963% 1.398% 1.683%
You are considering the purchase of preferred shares issued by Somerset Corp. These pay an annual dividend of $3.15 and are currently selling for $26.90. What is the implied return on this investment? 11.71% 8.54% 10.92% 12.16%
What is the fair market value of a perpetual preferred share just after payment of a quarterly $1.25 dividend? The market requires a dividend yield of 8% compounded semiannually on shares of similar risk.
You purchased a stock at a price of $57.04. The stock paid a dividend of $2.31 per share and the stock price at the end of the year is $62.59. What is the capital gains yield?
An investor buys shares in a mutual fund for $22. At the end of the year the fund distributes a dividend of $0.57, and after the distribution the net asset value of a share is $24.04. What is the investor's percentage return on the investment? Round your answer to two decimal places.
The following questions are based on a stock and its derivatives. Relevant information is listed in the Table below. Fundamental information Number of shares outstanding Debt-to-capital ratio Current dividend Retention ratio Current free cash flow to the firm (FCFF) Market information Market value of debt Tax rate Estimations of equity analysts Long-term growth of FCFF Short-term return on equity (ROE) for the first 2 years Long-term return on equity (ROE) Required return of debt Required return of equity 50,000 25% £1 40% £60,000 £2,000,000 30% 10% 30% 20% 5% 15% (b) Another equity analyst applies the FCFF model to evaluate the stock price. Show his price determination.

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