Ranking investments by expected returnsWhat makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Round the answers to two decimal places. Do not round intermediate calculations. Buy a stock for $45 a share, hold it for 3 years, then sell it for $75 a share (the stock pays annual dividends of $3 a share). %Buy a security for $25, hold it for 2 years, then sell it for $60 (current income on this security is zero). Do not round intermediate calculations. %Buy a 1-year, 12 percent note for $950 (assume that the note has a $1,000 par value and that it will be held to maturity). Do not round intermediate calculations. %

To determine the expected returns using approximate yield method and rank the 3 investments.…

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Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 1FPE: What makes for a good investment? Use the approximate yield formula or a financial calculator to...

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Ranking investments by expected returns

What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Round the answers to two decimal places. Do not round intermediate calculations.

Buy a stock for $45 a share, hold it for 3 years, then sell it for $75 a share (the stock pays annual dividends of $3 a share).
%
Buy a security for $25, hold it for 2 years, then sell it for $60 (current income on this security is zero). Do not round intermediate calculations.
%
Buy a 1-year, 12 percent note for $950 (assume that the note has a $1,000 par value and that it will be held to maturity). Do not round intermediate calculations.
%

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