Mini-Case After graduating from college last spring with a major in ac- counting and finance, Jim Hale took a job as an analyst trainee for an investment company in Chicago. His first few weeks were filled with a series of rotations throughout the firm's vari- ous operating units, but this week he was assigned to one of the firm's traders as an analyst. On his first day Jim's boss called him in and told him that he wanted to do some rudimentary analysis of the investment returns of a semiconductor manu- facturer called Advanced Micro Devices, Inc. (Ticker: AMD). Specifically, Jim was given the following month-end clos- ing prices for the company spanning the November 1, 2011, through November 1, 2012: Date Glosing Price Date Closing Price 1-Nov-11 1-Dec-11 3-Jan-12 5.69 5.4 6.71 7.35 8.02 7.36 6.08 1-Jun-12 2-Jul-12 1-Aug-12 4-Sep-12 1-Oct-12 1-Nov-12 5.73 4.06 3.72 3.37 2.05 1.88 1-Feb-12 1-Mar- 12 2-Apr-12 1-May-12 He was then instructed by his boss to complete the follow- ing tasks using the AMD price data (note that AMD paid no dividend during 2008).
Mini-Case After graduating from college last spring with a major in ac- counting and finance, Jim Hale took a job as an analyst trainee for an investment company in Chicago. His first few weeks were filled with a series of rotations throughout the firm's vari- ous operating units, but this week he was assigned to one of the firm's traders as an analyst. On his first day Jim's boss called him in and told him that he wanted to do some rudimentary analysis of the investment returns of a semiconductor manu- facturer called Advanced Micro Devices, Inc. (Ticker: AMD). Specifically, Jim was given the following month-end clos- ing prices for the company spanning the November 1, 2011, through November 1, 2012: Date Glosing Price Date Closing Price 1-Nov-11 1-Dec-11 3-Jan-12 5.69 5.4 6.71 7.35 8.02 7.36 6.08 1-Jun-12 2-Jul-12 1-Aug-12 4-Sep-12 1-Oct-12 1-Nov-12 5.73 4.06 3.72 3.37 2.05 1.88 1-Feb-12 1-Mar- 12 2-Apr-12 1-May-12 He was then instructed by his boss to complete the follow- ing tasks using the AMD price data (note that AMD paid no dividend during 2008).
Mini-Case After graduating from college last spring with a major in ac- counting and finance, Jim Hale took a job as an analyst trainee for an investment company in Chicago. His first few weeks were filled with a series of rotations throughout the firm's vari- ous operating units, but this week he was assigned to one of the firm's traders as an analyst. On his first day Jim's boss called him in and told him that he wanted to do some rudimentary analysis of the investment returns of a semiconductor manu- facturer called Advanced Micro Devices, Inc. (Ticker: AMD). Specifically, Jim was given the following month-end clos- ing prices for the company spanning the November 1, 2011, through November 1, 2012: Date Glosing Price Date Closing Price 1-Nov-11 1-Dec-11 3-Jan-12 5.69 5.4 6.71 7.35 8.02 7.36 6.08 1-Jun-12 2-Jul-12 1-Aug-12 4-Sep-12 1-Oct-12 1-Nov-12 5.73 4.06 3.72 3.37 2.05 1.88 1-Feb-12 1-Mar- 12 2-Apr-12 1-May-12 He was then instructed by his boss to complete the follow- ing tasks using the AMD price data (note that AMD paid no dividend during 2008).
1. Compute the monthly realized rates of return earned by AMD for the entire year.
2. Calculate the average monthly rate of return for AMD using both the arithmetic and geometric averages.
Transcribed Image Text:Mini-Case
After graduating from college last spring with a major in ac-
counting and finance, Jim Hale took a job as an analyst trainee
for an investment company in Chicago. His first few weeks
were filled with a series of rotations throughout the firm's vari-
ous operating units, but this week he was assigned to one of the
firm's traders as an analyst. On his first day Jim's boss called
him in and told him that he wanted to do some rudimentary
analysis of the investment returns of a semiconductor manu-
facturer called Advanced Micro Devices, Inc. (Ticker: AMD).
Specifically, Jim was given the following month-end clos-
ing prices for the company spanning the November 1, 2011,
through November 1, 2012:
Date Closing Price
Date
Closing Price
1-Nov-11
1-Dec-11
3 Jän-12
1-Feb-12
1 Mar-12
2-Apr-12
I-May-12
5.73
4:06
3.72
3.37
2.05
1.88
1Jun 12
2-Jul-12
5.69
5.4
6.71
7.35
8.02.
7.36
6.08
1-Aug-12
4 Sep-12
1-Oct-12.
1-Nov-12
He was then instructed by his boss to complete the follow-
ing tasks using the AMD price data (note that AMD paid no
dividend during 2008).
Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.
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