Question 3 The price history of stock ABC from year 0 to year 2 is as follows:Po P₁ P₂$50 $40 $60a. What are the holding-period returns of stock ABC for the first year, for the secondyear, and for the entire period?b. What are the arithmetic and geometric average returns over this 2-year period?c. The price and dividend history of stock XYZ from year 0 to year 2 are as follows:Year Price Dividend0$1001?$02$100 $8The price of stock XYZ in year 1 is not known. The holding-period return of stockXYZ in the second year (from year 1 to year 2) is 20%. What is the capital gains yieldin the second year?

Stock Valuation is the process of estimating the intrinsic or fair value of a company's stock or…

Answered: Question 3 The price history of stock…

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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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)?
Q15
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
QUESTION 4 What is the expected annual return for a stock that is priced at $64.78, is expected to pay a dividend of $2.00 every quarter forever, and is expected to pay its next dividend in 3 months? O 12.35% (plus or minus 2 bps) O3.09% (plus or minus 2 bps) O 12.93% (plus or minus 2 bps) O6.17% (plus or minus 2 bps) O the answer cannot be obtained based on the given information
Projections for a firm whose stock you wish to value: Years 1-6 EPS Payout Ratio Stock's beta is YTM on T-bond is Stock premium is 1.26 0.27 1. What is the stock's value? A Between 15.00 and 23.00 B Between 23.00 and 27.00 C Between 27.00 and 31.00 D Between 31.00 and 40.00 0.6 4.3% 5.0% Years 7-13 4.97 0.36 Discount the projected dividends at the required rate of return to estimate the stock's value. Only use years 1-24 in your computations. Years 14 - 24 6.91 0.42 2. Please go back to the original story. Suppose the stock becomes less risky from an investor's view. For instance, suppose its beta is now 0.80 If there are 90,000,000 shares outstanding, what is the impact on the market value of the firm? Hint: first find the new stock price, then compute how it changed, and multiply that change by the number of shares outstanding. A up between 0 and 160,000,000 B up between 160,000,000 and 500,000,000 C down between 0 and 160,000,000 D down between 160,000,000 and 500,000,000
What is the expected return of the following portfolio? Stock Price Per Share Number of Shares Security Expected Return A $ 16 1509.01 B $ 13 175 10.53
1. 1- Calculate the beta adjusted by the degree of freedom for stock X relative to the equity market using the information from the table (performance): A B 0.82 1.22 42.07 Year 1 2 3 4 5 6 7 None of the options is true X -7 -11 21 15 8 9 -2 Market 7 15 20 17 10 7 -1
Question 1 The following are the monthly rates of returns for two stocks, Stock A and Stock B over 2022. Month 1 2 3 4 5 6 7 8 9 10 11 12 Stock A 2.52% -3.2% 0.54% 1.32% 2.56% 1.10% 1.85% 0.58% 1.98% 0.05% 1.15% 2.23% Stock B 1.37% Page 3 of 5 1.58% 0.98% -0.78% 0.98% 1.35% -2.04% 0.87% 2.09% -0.07% 1.78% 0.63% (a) What is the average monthly rate of return for each stock? What is the standard deviation of returns for each stock? (b) Calculate the covariance between the rates of return. Calculate the correlation coefficient between the rates of return. ortfolio Analysis (c) Comment on the diversification benefits of constructing a portfolio of these two stocks.
Suppose a market consists of four stocks. The number of shares outstanding for each stock as well as the stock prices in two consecutive days are as follows: Stock A Stock B Stock C Stock D Shares outstanding 200 1000 400 3000 I $5 $30 $100 $40 Ро $15 $25 $80 $50 a) Compute the percentage increase in the price-weighted index for this market. b) Compute the percentage increase in the value-weighted index for this market. P₁
Q2 - Returns on stocks X and Y are listed below: Period 1 2 3 4 5 6 7Stock X 4% -2% 5% -1% 10% 7% 12%Stock Y -3% 7% 4% 2% 2% 8% -3% Consider a portfolio of 10% stock X and 90% stock Y. What is the mean of portfolio returns? Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).
Research 3 stocks of your choice and answer the following questions. 1. What is the name of the stock? 2. What is the stock symbol? 3. What is its current price per share? 4. What was the 52 week high price for the stock? 5. What was the 52 week low price for the stock? 6. Why did you pick these stocks?

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