Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Celestial Crane Cosmetics Inc. (CCC): Five years of realized returns for CCC are given in the following table. Remember: 1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for CCC for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 5.00% 3.40% 6.00% 8.40% 2.60% Given the preceding data, the average realized return on CCC's stock is The preceding data series represents historical returns is of CCC's hist If investors expect the average realized return from 2014 to 2018 on CO 15.75% 10.16% 5.08% 12.70% ns. Based on this conclusion, the standard deviation of CCC's o continue into the future, its coefficient of variation (CV) will be

Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Celestial Crane Cosmetics Inc. (CCC): Five years of realized returns for CCC are given in the following table. Remember: 1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for CCC for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 5.00% 3.40% 6.00% 8.40% 2.60% Given the preceding data, the average realized return on CCC's stock is The preceding data series represents historical returns is of CCC's hist If investors expect the average realized return from 2014 to 2018 on CO 15.75% 10.16% 5.08% 12.70% ns. Based on this conclusion, the standard deviation of CCC's o continue into the future, its coefficient of variation (CV) will be

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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(Calculating the geometric and arithmetic average rate of return) The common stock of the Brangus Cattle Company had the following end-of-year stock prices over the last five years and paid no cash dividends: Time 1 2 3 Brangus cattle Comapny $14 11 4 5 12 21 25 (Click on the icon in order to copy its contents into a spreadsheet.) a. Calculate the annual rate of return for each year from the above information. b. What is the arithmetic average rate of return earned by investing in Brangus Cattle Company's stock over this period? a. The annual rate of return at the end of year 2 is ☐ %. (Round to two decimal places.)
1. (True or false) Suppose I invested $10,000 in stock A 20 years ago and held that investment (reinvesting dividends, if any) until today. If stock A achieved a positive annual arithmetic rate of return over this 20-year period, then I must have more than $10,000 in my investment in this stock today. 2. (True or false). Short-selling allows investors to benefit from price declines. 3. (True or false). Suppose I hold a portfolio of two assets A and B. 40% of my money is invested in A and the remaining 60% is invested in B. Suppose the risks (return volatility) of A and B are both 10%. Then, the volatility of my portfolio return will also be 10%. 1
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Happy Dog Soap Inc. (HDS): Five years of realized returns for HDS are given in the following table. Remember: 1. While HDS was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for HDS for 2014 to 2018 are: 2014 2015 2016 2017 2018 Stock return 17.50% 11.90% 21.00% 29.40% 9.10% Given the preceding data, the average realized return on HDS’s stock is . The preceding data series represents of HDS’s historical returns. Based on this conclusion, the standard deviation of HDS’s historical returns is . If investors expect the average realized…
M1
Robert Gillman, an equity research analyst at Gillman Advisors, believes in efficient markets. He has been following the mining industry for the past 10 years and needs to determine the constant growth rate that he should use while valuing Pan Asia Mining Co. Robert has the following information available: • Pan Asia Mining Co.’s stock (Ticker: PAMC) is trading at $13.75. • The company’s stock is expected to pay a year-end dividend of $0.66 that is expected to grow at a certain rate. • The stock’s expected rate of return is 6.60%. Based on the information just given, what will be Robert’s forecast of PAMC’s growth rate?
I needed help finding what the formula is to find the PV Factor.
A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $59. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $44. What are the dividend yield and percentage capital gain in this case?
An investor estimates that next year’s sales for Dursley’s Hotels, Inc. should amount to about $100 million. The company has five million shares outstanding, generates a net profit margin of about 10%, and has a payout ratio of 50%. All figures are expected to hold for next year. Given this information, compute the following. .Estimated net earnings for next year Next year’s dividends per share The expected price of the stock (assuming the P/E ratio is 24.5 times earnings)
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
A stock had returns of 8%, 14%, and 2% for the past three years. Based on these returns, what is the probability that this stock will earn at least 20% in any one given year? A) 0.5% B) 1.0% C) 2.3% D) 5.0% E) 16.0% Answer: C) 2.3% Please show the steps.
You invested in a beverage stock earlier this year; January 1, at the price of $42.50. Suppose at the end of the year; December 31, the price of the stock sells at $48.78. Determine the capital gain yield of the stock.

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