You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends. Year Beginning of Year Price # of Shares Bought or Sold 2014 $ 100 bought 2015 $ 50 bought 2016 $ 75 sold 2017 $ 75 sold What is the dollar-weighted return over the entire time period? 2.6% 2.21% .74% 2.87% 50.00 55.00 51.00 54.00

You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends. Year Beginning of Year Price # of Shares Bought or Sold 2014 $ 100 bought 2015 $ 50 bought 2016 $ 75 sold 2017 $ 75 sold What is the dollar-weighted return over the entire time period? 2.6% 2.21% .74% 2.87% 50.00 55.00 51.00 54.00

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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A stock analyst at JP Dealers believes that a stock will earn the following returns next period depending on the state of the economy. Given the information below, what is the expected return on the stock? State of Economy Probability Return if State Occurs Depression 30% -10% Normal 50% 11% Boom 20% 18% Enter answer in decimal form, rounded to 4th digit, as in "0.1234"
Historical Realized Rates of Return You are considering an investment in either individual stocks or a portfolio of stocks. The two stocks you are researching, Stock A and Stock B, have the following historical returns: ΤΑ -17.00% 37.00 28.00 ЇВ -6.00% 16.00 -12.00 -5.00 47.00 23.00 21.00 a. Calculate the average rate of return for each stock during the 5-year period. Do not round intermediate calculations. Round your answers to two decimal places. Stock A: Stock B: % % Std. Dev. b. Suppose you had held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year? What would have been the average return on the portfolio during this period? Do not round intermediate calculations. Round your answers to two decimal places. Negative values, if any, should be indicated by a minus sign. Year 2017 2018 2019 2020 2021 Average return c. Calculate the standard deviation of returns for each stock and for the portfolio.…
19. You have developed data which give (1) the percentage annual returns of the market for the past five years and (2) similar percentage annual returns information on Stocks A and B. Which of the possible answers best describes the historical beta for A and B? Years Market % returns Stock A % returns Stock B % returns 2023 3% 16% 5% 2022 5% 20% 5% 2021 1% 10% 5% 2020 -10% -25% 5% 2019 6% 24% 5% A) bA > 0; bB = 1. B) bA > +1; bB = 0. C) bA = 0; bB < ─1. D) bA < +1; bB = 0. E) bA > ─1; bB > 1. F) None of the above (state your answer)
Using the data in the following table, calculate the volatility (standard deviation) of a portfolio that is 75% invested in stock A and 25% in stock B.
You have observed the following returns over time: Year Stock X Stock Y Market 2015 14% 13% 12% 2016 19 7 10 2017 −16 −5 −12 2018 3 1 1 2019 20 11 15 Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?
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?
*Please solve using excel and explain formulas. Question: Here are forecasts for next year for two stocks: Stock A Stock B Return on equity 17 % 14 % Earnings per share $ 3.00 $ 2.50 Dividends per share $ 2.00 $ 2.00 a. What are the dividend payout ratios for each firm? b. What are the expected dividend growth rates for each stock? Assume dividend has a steady growth for both stocks. c. If investors require a return of 17% on each stock, what are their values?
Review the following market information: Current Stock Market Return 11.25% Current T-Bill Price $979.43 Historic T-Bill Average Return 2.80% Historic Stock Market Average Return 8.10% Stock Beta 1.23 What is the required return (rounded to two places)?
Using the data in the following table, calculate the volatility (standard deviation) of a portfolio that is 60% invested in stock A and 40% in stock B. The volatility of the portfolio is %. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Year Stock A Stock B 2010 2011 2012 2013 2014 2015 -10% 19% 4% -3% 5% 12% 19% 39% 24% -8% -8% 35% Print Done Х
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EXCEL PROJECT AND EXCEL SOLUTION Consider the following stocks, all of which will pay a liquidating dividend in a year and nothing in the interim: Stock A Stock B Stock с Stock D Market Capitalization (5 million) 800 750 950 900 Expected Liquidating Dividend ($ million) 1000 1000 1000 1000 Beta PLEASE SHOW SOLUTIONS IN EXCEL 0.77 1.46 1.25 1.07 a. Calculate the expected return of each stock. b. What is the sign of correlation between the expected return and market capitalization of the stocks? In Problem 20, assume the risk-free rate is 3% and the market risk premium is 7%. a. What does the CAPM predict the expected return for each stock should be? b. Clearly, the CAPM predictions are not equal to the actual expected returns, so the CAPM does not hold. You decide to investigate this further. To see what kind of mistakes the CAPM is making, you decide to regress the actual expected return onto the expected return predicted by the CAPM.49 What is the intercept and slope coefficient of…

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