Question 1

Skyler Parts pays a constant annual dividend.Last year, the dividend yield was 3.75 percent when the stock was selling for $19.75 per share.What is the current price of the stock if the current dividend yield is 5 percent?

Accepted Answer

The answer of Skyler Parts pays a constant annual dividend.Last...

Question 2

One year ago, Brookes purchased 200 shares of Surfer Bay stock for $22,250.Today, he sold those shares for $114.00 per share.What is the total return on this investment if the dividend yield is 1.2 percent?

Accepted Answer

The answer of One year ago, Brookes purchased 200 shares...

Question 3

One year ago, you bought a stock for $62.35 per share.You received a dividend of $1.40 per share last month and sold the stock today for $63.75 per share.What is the capital gains yield on this investment?

Accepted Answer

The capital gains yield is calculated as (Selling Price - Purchase Price) / Purchase Price. Here, it is ($63.75 - $62.35) / $62.35 = 0.0225 or 2.25 percent.

Question 4

One year ago, you purchased 800 shares of stock for $37 per share.The stock pays $0.25 a share in dividends each year.Today, you sold your shares for $43.25 per share.What is your total dollar return on this investment?

Accepted Answer

The total dollar return includes both the capital gain and the dividends received. The capital gain is (43.25 - 37) * 800 = $5,000. The dividends received are 0.25 * 800 = $200. Therefore, the total dollar return is $5,000 + $200 = $5,200.

Question 5

A stock has returns for five years of 14 percent, -16 percent, 12 percent, 23 percent, and 4 percent, respectively.The stock has an average return of ______ percent and a standard deviation of _____ percent.

Accepted Answer

The average return is the sum of the returns divided by the number of years, which is (14 - 16 + 12 + 23 + 4) / 5 = 7.40%. The standard deviation is the square root of the variance, which is the average of the squared deviations from the mean. The variance is [(14 - 7.40)^2 + (-16 - 7.40)^2 + (12 - 7.40)^2 + (23 - 7.40)^2 + (4 - 7.40)^2] / (5 - 1) = 216.26, so the standard deviation is sqrt(216.26) = 14.72%.

Question 6

Over the last four years, a stock has had an arithmetic average return of 12.8 percent.Three of those four years produced returns of 22.6 percent, 15.2 percent, and -24.1 percent, respectively.What is the geometric average return for this four-year period?

Accepted Answer

The geometric average return is calculated by multiplying the returns for each year and then taking the nth root, where n is the number of years. In this case, the geometric average return is:(1 + 0.226) * (1 + 0.152) * (1 + -0.241) ^ (1/4) - 1 = 0.1018 = 10.18%

Question 7

Constant Dreamers Advertising pays a constant annual dividend of $1.45 per share on its stock.Last year at this time, the market rate of return on this stock was 11.5 percent.Today, the market rate has fallen to 10.2 percent.What would your capital gains yield have been if you had purchased this stock one year ago and then sold the stock today?

Accepted Answer

The answer of Constant Dreamers Advertising pays a constant annual...

Question 8

The Fix Anything Store pays a constant dividend.Last year, the dividend yield was 4.5 percent when the stock was selling for $36.25 a share.What must the stock price be today if the market currently requires a 4 percent dividend yield on this stock?

Accepted Answer

The dividend yield is calculated as the annual dividend divided by the stock price. Last year, the dividend yield was 4.5% with a stock price of $36.25, so the dividend was $36.25 * 4.5% = $1.63125. If the market now requires a 4% yield, the stock price should be $1.63125 / 4% = $40.78.

Question 9

One year ago, Jeni purchased 250 shares of TMO stock for $12,658.Today, she sold those shares for $52 per share.What is the capital gains yield on this investment if the dividend yield is 1.1 percent?

Accepted Answer

The answer of One year ago, Jeni purchased 250 shares...

Question 10

Alpha Industries stock had returns of 17 percent, -11 percent, 9 percent, and 2 percent for four of the last five years, respectively.The average return of the stock over this period was 8.7 percent.What is the standard deviation of the stock's returns?

Accepted Answer

The answer of Alpha Industries stock had returns of 17...

Question 11

You purchased a zero coupon bond one year ago for $296.50.The market interest rate is now 6.5 percent.If the bond had 15 years to maturity when you originally purchased it, what is your total return to date if the face value of the bond is $1,000?

Accepted Answer

The bond was purchased for $296.50 and has a face value of $1,000. The bond was held for one year, so it now has 14 years to maturity. The total return is calculated as [(Face Value / Purchase Price)^(1/Years Held) - 1]. The calculation is [(1000 / 296.50)^(1/14) - 1] = 0.3774 or 37.74%.

Question 12

Suppose you bought a$1,000 face value bond with a 5 percent coupon one year ago for $1,020.The bond sells today for $986.If the inflation rate last year was 2.3 percent, what was your total real rate of return on this investment?

Accepted Answer

The answer of Suppose you bought a$1,000 face value bond...

Question 13

Assume that large-company stocks had an average return of 12.1 percent and a standard deviation of 19.6 percent for a 40-year period.What range of returns would you expect to see on these stocks 95 percent of the time?

Accepted Answer

The answer of Assume that large-company stocks had an average...

Question 14

Assume that long-term corporate bonds had an average return of 6.4 percent and a standard deviation of 2.9 percent for a 50-year period.What range of returns would you expect to see on these bonds 68 percent of the time?

Accepted Answer

The range of returns that would be expected to see on these bonds 68 percent of the time is 3.5 percent to 9.3 percent. This is because the standard deviation of the returns is 2.9 percent, and 68 percent of the data falls within one standard deviation of the mean.

Question 15

The stock of Pepito Organic Foods is priced at $45 per share and has a dividend yield of 2.2 percent.The firm pays constant annual dividends.What is the amount of the next dividend per share?

Accepted Answer

The dividend yield is calculated as the annual dividend divided by the stock price. Therefore, the next dividend per share is 2.2% of $45, which is $0.99.

Question 16

You bought a share of 7.5 percent preferred stock for $91.60 last year.The market price for your stock is now $89.10.What is your total return to date on this investment?

Accepted Answer

The answer of You bought a share of 7.5 percent...

Question 17

A stock has had returns of 14 percent, -18 percent, 2 percent, 33 percent, 27 percent, and 6 percent over the last six years, respectively.What is the geometric return for this stock?

Accepted Answer

The answer of A stock has had returns of 14...

Question 18

You've observed the following returns on Blast It Corporation's stock over the past five years: 19 percent, -23 percent, 31 percent, 18 percent, and -7 percent, respectively.What was the variance of the returns over this period?

Accepted Answer

The answer of You've observed the following returns on Blast...

Question 19

Suppose a stock had an initial price of $47 per share, paid a dividend of $0.63 per share during the year, and had an ending share price of $ 38.What was the capital gains yield?

Accepted Answer

The capital gains yield is calculated as (Ending share price - Initial share price + Dividend) / Initial share price. In this case, the capital gains yield is ($38 - $47 + $0.63) / $47 = -19.15%.

Quiz 10: Some Lessons From Capital Market History