Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
Question
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Chapter 10, Problem 4QAP

A

Summary Introduction

Adequate information:

Face value is $1000.

The purchase price is $1010.

The selling price after one year is $1052.

The coupon rate is 4.9%.

To calculate: The total dollar return on investment.

Introduction: Investors can earn returns from investment in stocks in two forms, i.e., by capital gains due to an increase in stock value in the market or by dividends distributed by the company at a specified time period.

B

Summary Introduction

Adequate information:

Face value is $1000.

The purchase price is $1010.

The selling price after one year is $1052.

The coupon rate is 4.9%.

To calculate: The total nominal rate of return.

Introduction: Investors can earn returns from investment in stocks in two forms, i.e., by capital gains due to an increase in stock value in the market or by dividends distributed by the company at a specified time period.

C

Summary Introduction

Adequate information:

Face value is $1000.

The purchase price is $1010.

The selling price after one year is $1052.

The coupon rate is 4.9%.

The inflation rate is 3%.

To calculate: The real rate of return on the investment.

Introduction: Investors can earn returns from investment in stocks in two forms, i.e., by capital gains due to an increase in stock value in the market or by dividends distributed by the company at a specified time period.

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