Corporate Finance
Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 10, Problem 10P

a)

Summary Introduction

To determine: The average dividend yield for S&P 500 from the year 2002 to 2011.

Introduction:

Dividend yield is a ratio that specifies how much a company pays as dividends every year on comparing with its share price. It is considered as the return on the investment for a stock.

b)

Summary Introduction

To determine: The volatility of dividend yield.

Introduction:

Dividend is a sum of money paid to the shareholders of the company. It is distributed among the investors from the portion of company’s earnings.

c)

Summary Introduction

To determine: The average annual return of the S&P500 from 2002 to 2011.

Introduction:

Average annaul return refers to the returns that an investment earns in an average year over different periods.

d)

Summary Introduction

To determine: The volatility of the S&P500 returns from capital gains.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

e)

Summary Introduction

To discuss: The capital gains or dividends are the most important components of the average returns of S&P500 in the period.

Introduction:

Capital gains yield is a ratio indicates the rise in the price of common stock.

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Corporate Finance

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