(Related to Checkpoint 7.2) (Calculating the geometric and arithmetic average rate of return) Marsh Inc. had the following end-of-year stock prices over the last five years and paid no cash dividends: Time 1 2 3 4 Marsh $11 10 20 9 11 (Click on the icon in order to copy its contents into a spreadsheet.) 5 a. Calculate the annual rate of return for each year from the above information. b. What is the arithmetic average rate of retum earned by investing in Marsh's stock over this period? a. The annual rate of return at the end of year 2 is -9.09 %. (Round to two decimal places.) The annual rate of return at the end of year 3 is The annual rate of return at the end of year 4 is The annual rate of retum at the end of year 5 is 100%. (Round to two decimal places.) -55 %. (Round to two decimal places.) 22.22 %. (Round to two decimal places.) b. The arithmetic average rate of return earned by investing in Marsh's stock over this period is%. (Round to two decimal places.)

(Related to Checkpoint 7.2) (Calculating the geometric and arithmetic average rate of return) Marsh Inc. had the following end-of-year stock prices over the last five years and paid no cash dividends: Time 1 2 3 4 Marsh $11 10 20 9 11 (Click on the icon in order to copy its contents into a spreadsheet.) 5 a. Calculate the annual rate of return for each year from the above information. b. What is the arithmetic average rate of retum earned by investing in Marsh's stock over this period? a. The annual rate of return at the end of year 2 is -9.09 %. (Round to two decimal places.) The annual rate of return at the end of year 3 is The annual rate of return at the end of year 4 is The annual rate of retum at the end of year 5 is 100%. (Round to two decimal places.) -55 %. (Round to two decimal places.) 22.22 %. (Round to two decimal places.) b. The arithmetic average rate of return earned by investing in Marsh's stock over this period is%. (Round 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

Problem 1PS

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UNIT 7-8
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 over the past four years: Year 1 Year 2 Year 3 Year 4 High price $ 98.70 $ $ $131.70 Low price 73.53 EPS 122.30 89.64 148.33 70.32 116.85 7.98 9.73 10.81 12.20 Earnings are projected to grow at 5 percent over the next year. a. What is your high target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is your low target stock price over the next year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. High target stock price b. Low target stock price 4
(Calculating rates of return) The common stock of Placo Enterprises had a market price of $10.38 on the day you purchased it just one year ago. During the past year the stock had paid a dividend of $0.74 and closed at a price of $11.57. What rate of return did you earn on your investment in Placo's stock? The rate of return you earned on your investment in Placo's stock is%. (Round to two decimal places.)
The rates of return on Cherry Jalopies, Incorporated, stock over the last five years were 16 percent, 11 percent, −1 percent, 7 percent, and 10 percent. Over the same period, the returns on Straw Construction Company’s stock were 16 percent, 22 percent, −1 percent, 5 percent, and 12 percent. What was the arithmetic average return on each stock over this period? Note: Enter your answers as a percent rounded to 1 decimal place.
Use the Gordon Growth Model to estimate the cost of the ordinary shares (expressed as a percentage to two decimal places) from the information provided attached.
The rates of return on Cherry Jalopies, Inc., stock over the last five years were 14 percent, 11 percent, -3 percent, 2 percent, and 6 percent. Over the same period, the returns on Straw Construction Company's stock were 16 percent, 15 percent, -9 percent, 4 percent, and 11 percent. What was the arithmetic average return on each stock over this period? (Enter your answers as a percent rounded to 1 decimal place.) Cherry average return % Straw average return %
Note: Please answer this question only by typing your answers in the typing space available for this question Assume that the annual rates of return for two stocks (Reliance and Wipro) for the past 5 years are as given below: Year 2 3 4 5 Reliance 35% 11% -7% -12% 24% Wipro 28% 7% -11% 15% -5% Based on the above information answer the following questions: (a) Compute the arithmetic mean of the annual rate of return for each stock. Which stock is preferable by this measure? (b) Compute the geometric mean of the annual rate of return for each stock. Which stock is preferable by this measure? (c) Compute the standard deviation of the annual rate of return for each stock. Which stock is preferable by this measure?
Using the data in the following table, immediately. 9 calculate the return for investing in Boeing stock (BA) from January 2, 2008, to January 2, 2009, and also from January 3, 2011, to January 3, 2012, assuming all dividends are reinvested in the stock The realized return from January 2, 2008, to January 2, 2009 is Data table %. (Round to two decimal places.) (Click on the following icon in order to copy its contents into a spreadsheet.) Dividend Historical Stock and Dividend Data for Boeing Date 1/3/2011 2/9/2011 5/11/2011 8/10/2011 11/8/2011 1/3/2012 Date 1/2/2008 2/6/2008 5/7/2008 8/6/2008 11/5/2008 1/2/2009 Price $87.75 $79.76 $85.01 $66.77 $47.75 $44.02 $0.37 $0.37 $0.37 $0.00 Print Done Price $67.58 $70.28 $80.89 $56.25 $64.88 $74.91 Dividend $0.41 $0.41 $0.41 $0.41 I X
Suppose that a firm's recent earnings per share and dividend per share are $3.10 and $2.10, respectively. Both are expected to grow 7 percent. However, the firm's current P/E ratio of 30 seems high for this growth rate. The P/E ratio is expected to fall to 26 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations. Round your answers to 3 decimal places Years First year Second year Third year Fourth year Fifth year Dividends Compute the value of this stock in five years. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price
Carnes Cosmetics Co.'s stock price is $59, and it recently paid a $1.25 dividend. This dividend is expected to grow by 27% for the next 3 years, then grow forever at a constant rate, g; and rs = 11%. At what constant rate is the stock expected to grow after Year 3? Do not round intermediate calculations. Round your answer to two decimal places. %
Given the following possible returns (dividends plus capital gains) over the coming year from P100,000 investment in General Motors common stock: State of Economy Profitability ReturnRecession 0.20 P-1,000 Normal year 0.60 1,500Boom 0.20 2,500What is the standard deviation of returns?
(Calculating rates of return) Blaxo Balloons manufactures and distributes birthday balloons. At the beginning of the year Blaxo's common stock was selling for $17.95 but by year end it was only $16.91. If the firm paid a total cash dividend of $1.76 during the year, what rate of return would you have earned if you had purchased the stock exactly one year ago? What would your rate of return have been if the firm had paid no cash dividend? The rate of return you would have earned is %. (Round to two decimal places.)

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