You purchased 74 shares of Z stock in January 2008 for $40 per share. Each year you received a cash dividend of $0.75 per share. In December of 2012, you sold 74 shares of Z for $60 per share. Brokerage fees amounted to 3.0% of the purchase price and 3.0% of the sales proceeds. Use this information to answer the next 5 questions. 18. If inflation averaged 4% per year over the investment period, the average annual after-tax real rate of return would be? (use your answer from the previous question) 4.31% 2.50% 3.44% 3.57%

You purchased 74 shares of Z stock in January 2008 for $40 per share. Each year you received a cash dividend of $0.75 per share. In December of 2012, you sold 74 shares of Z for $60 per share. Brokerage fees amounted to 3.0% of the purchase price and 3.0% of the sales proceeds. Use this information to answer the next 5 questions. 18. If inflation averaged 4% per year over the investment period, the average annual after-tax real rate of return would be? (use your answer from the previous question) 4.31% 2.50% 3.44% 3.57%

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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You purchased 74 shares of Z stock in January 2008 for $40 per share. Each year you received a cash dividend of S0.75 per share. In December of 2012, you sold 74 shares of Z for $60 per share. Brokerage fees amounted to 3.0% of the purchase price and 3.0% of the sales proceeds. Use this information to answer the next 5 questions, 19. What would be your future account value (after-tax and after inflation) if you invested $600 each month into a growth mutual fund for 35 years? Assume an average annual rate of return of 7.5 percent. Assume a combined federal and state income tax rate of 28% and an average annual inflation rate of 2.7 percent. O $362419.38 O $449,687.25 O $418,469,15 O $412.758.60 You purchased 74 shares of Z stock in January 2008 for $40 per share. Each year you received a cash dividend of $0.75 per share. In December of 2012. you sold 74 shares of Z for $60 per share. Brokerage fees amounted to 3.0% of the purchase price and 3.0% of the sales proceeds, Use this…
Today, you sold your Riot Blockchain, Inc stock (ticker: RIOT) for $54.5/share. Last year, you paid $51.5/share for that stock. During the year, RIOT paid you $2/share in dividends. If inflation averaged 2.8% during the year, your approximate real rate of return on the RIOT investment is: a. 12.5 percent b. 9.7 percent c. 12.2 percent d. 3.5 percent e. 6.9 percent
You purchase 100 shares of stock for $47 a share. The stock pays a $3 per share dividend at year - end. What is the rate of return on your investment for these end-of-year stock prices? What is your real (inflation - adjusted) rate of return? Assume an inflation rate of 4%. (Round your answers to 2 decimal places. Use the minus sign for negative numbers if it is necessary.) a) End of year stock price = $43 Real rate of return = ? Real rate= ? b) End of year stock price = $47 Real rate of return= ? Real rate= ? c) End of year stock price = $50 Real rate of return= ? Real rate = ?
Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $1.75 yesterday. Bahnsen's dividend is expected to grow at 6% per year for the next 3 years. If you buy the stock, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 12%. A. Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that D0 = $1.75. Round your answer to the nearest cent. B.Given that the first dividend payment will occur 1 year from now, find the present value of the dividend stream; that is, calculate the PVs of D1, D2, and D3, and then sum these PVs. Round your answer to the nearest cent. Do not round your intermediate calculations. C. You expect the price of the stock 3 years from now to be $36.82; that is, you expect to equal $36.82. Discounted at a 12% rate, what is the present value of this expected future stock price? In other words, calculate the PV of $36.82. Round your answer to the nearest…
Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $1.25 yesterday. Bahnsen's dividend is expected to grow at 4% per year for the next 3 years. If you buy the stock, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 10%. a. Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that Do = $1.25. Do not round intermediate calculations. Round your answers to the nearest cent. D1 = $ D2 = $ D3 = $ b. Given that the first dividend payment will occur 1 year from now, find the present value of the dividend stream; that is, calculate the PVs of D1, D2, and D3, and then sum these PVs. Do not round intermediate calculations. Round your answer to the nearest cent. c. You expect the price of the stock 3 years from now to be $24.37; that is, you expect P3 to equal $24.37. Discounted at a 10% rate, what is the present value of this expected future stock price? In other words,…
Your broker mailed you your year-end statement. You have P250,000 invested in Happy Chemical, P180,000 tied up in Honey Pie Co., P360,000 in Sweet Candy and P110,000 in MyBabeCorp. The annualized returns for thee stock is 16.5% for Happy; 12% for Honey; 18.5% for Sweet and 15.3% for MyBabe. What is the return of your entire portfolio?
Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $2.00 yesterday. Bahnsen's dividend is expected to grow at 8% per year for the next 3 years. If you buy the stock, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 9%. a. Find the expected dividend for each of the next 3 years; that is, calculate D1, D2, and D3. Note that Do = $2.00. Do not round intermediate calculations. Round your answers to the nearest cent. D₁ = $ D₂ = $ D3 = $ b. Given that the first dividend payment will occur 1 year from now, find the present value of the dividend stream; that is, calculate the PVs of D1, D2, and D3, and then sum these PVs. Do not round intermediate calculations. Round your answer to the nearest cent. c. You expect the price of the stock 3 years from now to be $272.10; that is, you expect Pa to equal $272.10. Discounted at a 9% rate, what is the present value of this expected future stock price? In other words,…
You purchase 115 shares of stock for $53 a share. The stock pays a $7 per share dividend at year- end. What is the rate of return on your investment for these end-of-year stock prices? What is your real (inflation-adjusted) rate of return? Assume an inflation rate of 5%. (Round your answers to 2 decimal places. Use the minus sign for negative numbers If it is necessary.) a. End-of-year stock price = $48 Rate of return Real rate b. End-of-year stock price = $53 Rate of return Real rate c. End-of-year stock price = $60 Rate of return Real rate
Your broker offers to sell you some shares of Bahnsen & Co. common stock that paid a dividend of $3.00 yesterday. Bahnsen's dividend is expected to grow at 8% per year for the next 3 years. If you buy the stock, you plan to hold it for 3 years and then sell it. The appropriate discount rate is 12%. Use equation below to calculate the present value of this stock. Assume that g = 8% and that it is constant. Do not round intermediate calculations. Round your answer to the nearest cent.
2. Answer both questions: a. You purchase 100 shares of stock for $40 a share. The stock pays a $2 per share dividend at year-end. What is the rate of return on your investment if the year-end stock prices turn out to be $38, $40, and $42? What is your real (inflation-adjusted) rate of return in each case, assuming an inflation rate of 3%? b. Consider the following information on the returns on stock and bond investment. Scenario Profitability Stocks Bonds Recession .2 -5% +14% Normal Economy .6 +15% +8% Boom .2 +25% +4% i) Calculate the expected rate of return and standard deviation in each investment. ii) Do your results support or contradict the historical record on the relationship between risk and return in the financial market in both Canada and the United States? iii) Which investment would you prefer? Explain your answer.
Compute the real rates of return for the following situations assuming that the inflation rate is 2 percent. Compute the real rates of return if the rate of inflation was 9 percent. Use a minus sign to enter negative values, if any. Do not round intermediate calculations. Round your answers to one decimal places. a. On February 1, you bought 90 shares of stock in the Francesca Corporation for $30 a share and a year later you sold it for $33 a share. During the year, you received a cash dividend of $1.70 a share. Real rate of return at 2%: % Real rate of return at 9%: b. On August 15, you purchased 100 shares of stock in the Cara Cotton Company at $41 a share and a year later you sold it for $35 a share. During the year, you eceived dividends of $3.00 a share. Real rate of return at 2%: % % Real rate of return at 9%: c. At the beginning of last year, you invested $4,950 in 90 shares of the Chang Corporation. During the year, Chang paid dividends of $3.00 per share. At the end of the…
An investor bought a stock for $19 (at t=0) and one year later it paid a $0 dividend (at t=1). Just after the dividend was paid, the stock price was $5 (at t=1). Inflation over the past year (from t=0 to t=1) was 6% pa, given as an effective annual rate. Which of the following statements is NOTcorrect? All answer options are rounded to 6 decimal places. The stock investment produced a: Question 1Select one: a. Nominal capital return of -73.684211% pa. b. Nominal total return of -73.684211% pa. c. Real capital return of -72.105263% pa. d. Real income return of 0% pa. e. Real total return of -75.173783% pa.

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