(Calculating the geometric and arithmetic average rate of return) The common stock of the Brangus Cattle Company had the following end-of-year stock prices over the last five years and paid no cash dividends: Brangus cattle Comapny $16 Time 1 2 3 11 4 21 5 29 (Click on the icon in order to copy its contents into a spreadsheet.) 8 a. Calculate the annual rate of return for each year from the above information. b. What is the arithmetic average rate of return earned by investing in Brangus Cattle Company's stock over this period? c. What is the geometric average rate of return earned by investing in Brangus Cattle Company's stock over this period? d. Which type of average rate of return best describes the average annual rate of return earned over the period (the arithmetic or geometric)? Why?

(Calculating the geometric and arithmetic average rate of return) The common stock of the Brangus Cattle Company had the following end-of-year stock prices over the last five years and paid no cash dividends: Brangus cattle Comapny $16 Time 1 2 3 11 4 21 5 29 (Click on the icon in order to copy its contents into a spreadsheet.) 8 a. Calculate the annual rate of return for each year from the above information. b. What is the arithmetic average rate of return earned by investing in Brangus Cattle Company's stock over this period? c. What is the geometric average rate of return earned by investing in Brangus Cattle Company's stock over this period? d. Which type of average rate of return best describes the average annual rate of return earned over the period (the arithmetic or geometric)? Why?

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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(Calculating the geometric and arithmetic average rate of return) The common stock of the Brangus Cattle Company had the following end-of-year stock prices over the last five years and paid no cash dividends: Time 1 2 3 Brangus cattle Comapny $14 11 4 5 12 21 25 (Click on the icon in order to copy its contents into a spreadsheet.) a. Calculate the annual rate of return for each year from the above information. b. What is the arithmetic average rate of return earned by investing in Brangus Cattle Company's stock over this period? a. The annual rate of return at the end of year 2 is ☐ %. (Round to two decimal places.)
Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $5.60 dividend every year, in perpetuity. If this issue currently sells for $80.40 per share, what is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Cortez, Inc., is expecting to pay out a dividend of $2.5 next year. After that it expects its dividend to grow by 25 cents per year for the next 3 years. what is the present value of dividends over the four year period if the required rate of return is 9 percent? (do not round intermediate calculations. round final answer to two decimal places.) $11.88 $11.06 $7.61 $9.23 none of these
Bedeker, Inc., has an issue of preferred stock outstanding that pays a $5.75 dividend every year in perpetuity. If this issue currently sells for $97 per share, what is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Business has been good for Keystone Control Systems, as indicated by the six-year growth in earnings per share. The earnings have grown from $1.00 to $1.87. a. Determine the compound annual rate of growth in earnings
The following spreadsheet contains monthly returns for Cola Co. and Gas Co. for 2013. Using these data, estimate the average monthly return and the volatility for each stock. (Click on the following icon in order to copy its contents into a spreadsheet.) Month January February March April May June July August September October November December The average monthly return for Cola Co. is%. (Round to two decimal places.) Cola Co. - 6.80% 7.40% -2.10% 4.30% 11.30% 1.40% 4.10% - 0.60% 0.80% 1.90% 0.70% - 2.90% Gas Co. - 3.00% - 7.70% 0.20% 3.10% - 1.00% 0.00% 4.80% - 3.80% - 5.80% 1.20% - 2.30% 4.70%
(Related to Checkpoint 7.2) (Calculating the geometric and arithmetic average rate of return) Marsh Inc. had the following end-of-year stock prices over the last five years and paid no cash dividends Time 2 Marsh $10 10 20 4 5 10 (Click on the icon in order to copy its contents into a spreadsheet) 7 a Calculate the annual rate of return for each year from the above information. b. What is the arithmetic average rate of retum earned by investing in Marsh's stock over this period? C. What is the geometric average rate of return earned by investing in Marsh's stock over this period? d. Considering the beginning and ending stock prices for the five-year period are the same, which type of average rate of return (the arithmetic or geometric) better describes the average annual rate of return earned over the period? a. The annual rate of return at the end of year 2 is%. (Round to two decimal places.) GILE
You've observed the following returns on Pine Computer's stock over the past five years: -26.7 percent, 14.8 percent, 32.6 percent, 2.9 percent, and 21.9 percent. a. What was the arithmetic average return on the stock over this five-year period? Note: 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 variance of the returns over this period? Note: Do not round intermediate calculations and round your answer to 6 decimal places, e.g., .161616. c. What was the standard deviation of the returns over this period? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Arithmetic average return b. Variance c. Standard deviation 96 %
Gee-Gee common stock returned a nifty 21.77 percent rate of return last year. The dividend amount was $1.96 a share which equated to a dividend yield of 2.05 percent. What was the rate of price appreciation for the year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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: Year 1 Year 2 Year 3 Year 4 High $87.93 $100.35 $121.89 $133.60 Low price 69.85 83.19 79.99 110.18 EPS 6.54 8.96 8.62 10.21 Earnings are expected to grow at 5.5 percent over the next year. a. What is the 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 the 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.) a. High target price b. Low target price price
Ted McKay has just bought the common stock of Sunland Corp. Management of Sunland expects the company expects to grow at the following rates for the next three years: 40 percent, 35 percent, and 25 percent. Last year the company paid a dividend of $2.20. Assume a required rate of return of 12 percent. Compute the expected dividend for the first year. D1 $enter a dollar amount of the dividend for the first year rounded to 2 decimal places
The Jackson-Timberlake Wardrobe Company just paid a dividend of $1.38 per share on its stock. The dividends are expected to grow at a constant rate of 5 percent per year indefinitely. a. If investors require a return of 11 percent on the company's stock, what is the current price? Current price $24.15 b. What will the price be in 6 years? Stock price in 6 years $32.36

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