SavedOver the last five years, the price of stock A has been changing as follows. Whatshould be the geometric return? Hint: make sure you use the return and correctnumber of periods in the formula.YearStock Price7.47%.8.37%.10.00%.6.37%.9.04%.11.12%.2019$872020$902021$832022$1002023$120

Solution:Geometric rate of return means the rate of overall rate of return computed in terms of per…

Answered: Over the last five years, the price of…

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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Use the table for the question(s) below. Consider the following realized annual returns: Index Stock A Year End Realized. Realized Return Return 23.6% 46.3% 24.7% 26.7% 30.5% 86.9% 9.0% 23.1% -2.0% 0.2% -17.3% -3.2% -24.3% -27.0% 32.2% 27.9% 4.4% -5.1% 7.4% -11.3% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Suppose that you want to use the 10-year historical average return on Stock A to forecast the expected future return on Stock A. The 95% confidence interval for your estimate of the expect return is closest to: O 6.5% to 26.3%. O-15.0% to 47.9%. -4.5% to 37.4%. 13.2% to 19.5%.
Calculating Real Returns and Risk Premiums You’ve observed the following returns on Bennington Corporation’s stock over the past five years: 13 percent, −8 percent, 16 percent, 16 percent, and 10 percent. Suppose the average inflation rate over this period was 1.5 percent and the average T-bill rate over the period was 5 percent. a. What was the average real return on the company's stock? (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 average nominal risk premium on the company's stock?
You are considering the purchase of a stock that yesterday announced EPS of $6.24. You feel that earnings will grow at 23% for the next three years. After that growth in earnings should level-off to 3% per year into the future. You require a return of 13%. Based on these assumptions, what would you pay for the stock today? $105.12 $141.83 $95.59 $119.50
9. 10. Use the information below and the P/E as an Earnings Multiplier Model to find this stock's intrinsic value and determine whether it's over or under valued if its current price is $71.32. 2020 2021 2022 2023 2024 61.57 39.25 60.93 73.70 9.70 4.56 26.68 6.80 1.34 16.52 4.30 7.00 .60 .70 .80 .65 39.55 45.00 95.00 93.00 97.19 15.0 Bold figures are 21 .86 Value Line estimates 1.1% 1.2% 50 .80 64 76.35 70.79 124.24 107.76 37.7 3.9 1.94 1.2% VALUE LINE PUB. LLC 77.95 Revenues per sh 11.70 "Cash Flow" per sh 8.50 Earnings per sh A .88 Div'ds Decl'd per sh C .65 Cap'l Spending per sh 51.35 Book Value per sh Common Shs Outst'g B Avg Ann'l P/E Ratio Relative P/E Ratio Avg Ann'l Div'd Yield A stock selling for $20 has an intrinsic value of $10. Is it over or under valued?
Review the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?
What is the volatility of a certain stock index from 2019 to 2022? The return for each year is given by: 4,30%, 10,75%, 2,05%, and 12,70%. Calculate the average return over the four-year period. Then, determine the volatility (standard deviation) of the stock index returns.
Q15
can you help me with question b please
What is the most you should be willing to pay for the stock in the table? Expected Expected Price in 1Dividend in 1 year Required Current Return Price Year $376.29 $3.91 5.80% $89.00
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 $ 85.61 68.33 6.46 a. High target price b. Low target price Year 2 $94.99 79.75 8.88 Year 3 $ 116.05 84.23 8.54 Year 4 $ 128.08 105.86 10.13 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? 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.
Consider the rate of return of stocks ABC and XYZ. Year rABC rXYZ 1 22 % 34 % 2 12 12 3 14 18 4 7 0 5 1 −8 1. If you were equally likely to earn a return of 22%, 12%, 14%, 7%, or 1%, in each year (these are the five annual returns for stock ABC), what would be your expected rate of return? (Do not round intermediate calculations.) 2. What if the five possible outcomes were those of stock XYZ? 3. Given your answers to (d) and (e), which measure of average return, arithmetic or geometric, appears more useful for predicting future performance? A. Arithmetic B. Geometric
Bhupatbhai

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