A-ZеВookChapter 12Financial Planning Exercise 2Calculating expected return on an investmentAn investor is thinking about buying some shares of Health Diagnostics, Inc., at $50 a share. She expects the price of the stock to rise to $90 a shareover the next 3 years. During that time, she also expects to receive annual dividends of $4 per share. Assuming that the investor's expectations (aboutedthe future price of the stock and the dividends that it pays) hold up, what rate of return can the investor expect to earn on this investment? (Hint: Useeither the approximate yield formula or a financial calculator to solve this problem.) Round the answer to two decimal places.%Grade it NowSave & ContinueContinue without savingNOV14átv A wMacBook Air

Given data; Current price per share = $50 price per share after 3 years = $90 annual dividend = $ 4…

eBook Chapter 12 Financial Planning Exercise 2 Calculating expected return on an investment An investor is thinking about buying some shares of Health Diagnostics, Inc., at $50 a share. She expects the price of the stock to rise to $90 a share over the next 3 years. During that time, she also expects to receive annual dividends of $4 per share. Assuming that the investor's expectations (about the future price of the stock and the dividends that it pays) hold up, what rate of return can the investor expect to earn on this investment? (Hint: Use either the approximate yield formula or a financial calculator to solve this problem.) Round the answer to two decimal places. %

eBook Chapter 12 Financial Planning Exercise 2 Calculating expected return on an investment An investor is thinking about buying some shares of Health Diagnostics, Inc., at $50 a share. She expects the price of the stock to rise to $90 a share over the next 3 years. During that time, she also expects to receive annual dividends of $4 per share. Assuming that the investor's expectations (about the future price of the stock and the dividends that it pays) hold up, what rate of return can the investor expect to earn on this investment? (Hint: Use either the approximate yield formula or a financial calculator to solve this problem.) Round the answer to two decimal places. %

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

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#15 Scenario Analysis and Portfolio Risk The common stock of Learning Tower of Pita Inc., a restaurant chain, will generate payoffs to investor next year, which depends on the state of the economy. Dividends Stock Price Boom $8 $240 Normal economy $4 $90 Recession $0 0 The company goes out of business if a recession hits. Calculate the expected rate of return and standard deviation of return to the Leaning Tower of Pita shareholders. Assume for simplicity that the three possible states of the economy are equally like, The stock today for $80. Who would view the stock of Leaning Tower of Pita as a risk-reducing investment- the owner of a gambling casino or a successful bankruptcy lawyer? Explain.
Problem 15-12 (Static) Suppose you think Appx stock is going to appreciate substantially in value in the next year. Say the stock's current price, So, is $100, and the call option expiring in one year has an exercise price, X, of $100 and is selling at a price, C, of $10. With $10,000 to invest, you are considering three alternatives: a. Invest all $10,000 in the stock, buying 100 shares. b. Invest all $10,000 in 1,000 options (10 contracts). c. Buy 100 options (one contract) for $1,000 and invest the remaining $9,000 in a money market fund paying 4% interest annually. Required: a. Calculate the value of the investment for stock price one year from now? (Leave no cells blank - be certain to enter "0" wherever required.) a. All stocks (100 shares) b. All options (1,000 options) c. Bills + 100 options X Answer is complete but not entirely correct. $ $ $ $80 8,000 0 9,360 $ $ $ Price of Stock 1 Year from Now $100 $110 10,000 0 9,360 $ $ $ 11,000 1,000 10,360 $120 $ 12,000 $ 1,000 $ 11,360
Problem 7-26 Greta, an elderly investor, has a degree of risk aversion of A = 3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S&P 500 and a hedge fund, as well as a number of one-year strategies. (All rates are annual and continuously compounded.) The S&P 500 risk premium is estimated at 6% per year, with a SD of 21%. The hedge fund risk premium is estimated at 11% with a SD of 36%. The returns on both of these portfolios in any particular year are uncorrelated with its own returns in other years. They are also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation |coefficient between the annual returns on the S&P 500 and the hedge fund in the same year is zero, but Greta is not fully convinced by this claim. a-1. Assuming the correlation between the annual returns on the two portfolios is 0.3, what would be the optimal asset allocation? (Do not round intermediate calculations. Enter…
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15 years? 2. Stock Values The next dividend pavment by Hoffman, Inc., will be $2.05 per share. The dividends are anticipated to maintain a growth rate of LO 1
PS #2 Type A: Brite Events has been growing at a rate of 20% per year, and you expect this growth rate in earnings and dividends to continue for another 4 years. The last dividend paid was $2, and if the steady (i.e., constant) growth rate after 4 years is 58, what should the stock price be today? Assume that the stock has a beta of 2.0, Treasury bills yield 3%, and the market risk premium is 6%.
plz solve it within 30-40 mins I'll give you multiple upvote
D Question 20 1 pts You own $75,000 worth of stock, and you are worried the price may fall by year-end in 6 months. You are considering using either puts or calls to hedge this position. Given this, which of the following statements is (are) correct. L One way to hedge your position would be to buy puts. IL. One way to hedge your position would be to write calls. I.I f major stock price declines are likely, hedging with puts is probably better than hedging with short calls. lonly O l only O , I, and II O land III only
quiz 8-19
All............
8. Problem 8.16 (CAPM and Portfolio Return) eBook Problem Walk-Through You have been managing a $5 million portfolio that has beta of 1.15 and a required rate of return of 8.175%. The current risk-free rate is 3%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.85, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places. %
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