Andover Newton Theological School Return Financial Questions

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Andover Newton Theological School

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Please answer return questions in decimal form and round to 2 decimal places (i.e. 5.10% is .05). Below are the values of your portfolio as well as dividends received for each year. (Hint: Don't forge Year Portfolio Value Dividends 1 350 0 2 325 0 3 375 10 4 400 5 What is your portfolio return over the entire holding period? What is your annualized return? Answer in percent form where applicable (round to the nearest tenth). You hold a portfolio of 3 stocks, A, B, and C. You purchase the given number of shares at time T = 0 and sell all the shares you own at time T = 2. Stock B pays a dividend of $1 between T=1 and T=2. Stock C has a 2:1 split between T=1 and T=2. Stock #shares purchased T=2 Price at T=0 Price at T=1 A $25 100 $20 $30 B $56 200 $40 $28 C 300 $12 $17 Price at $8 How much $$$ worth of stock did you buy at T=0? How much $$$ worth of stock did you sell off at T=2 (Hint: consider distributions)? What is your holding period return for each stock? What is your holding period return for your entire portfolio? What is your portfolio return over the first period (i.e. the period from T=0 to T=1)? What is your portfolio return for the second period? Answer in percentage form (round to 1 decimal place). Consider the three stocks in the following table. Pt represents the price at time t, and Qt represents the shares outstanding at time t. Stock C splits 2:1 in the last period. Stock Po Qo P1 Q1 P2 Q2 A 90 100 95 100 95 100 B 50 200 45 200 45 200 C 100 200 110 200 55 400 Calculate the first period rates of return on a market value-weighted index of the three stocks. Calculate the first period rates of return on a Equal-weighted index of the three stocks. Consider a company that sells 100,000 shares of stock in an IPO. The issue price is $26 per share. At the market close on the first day of trading the stock price is $32. What is the percentage underpricing (i.e. first day return) of the IPO?
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1

Finance Questions

Student’s Name
Course
Institutional Affiliation
Instructor’s Name
Date

2

Finance Questions
Please answer return questions in decimal form and round to 2 decimal places (i.e., 5.10%
is .05).
Below are the values of your portfolio as well as
dividends received for each year. (Hint: Don't forget
dividends!)

Portfolio
Year

Dividends
Value

1

350

0

2

325

0

3

375

10

4

400

5

What is your portfolio return over the entire holding period?
Gain on the portfolio = dividends + capital gains
= 15 + (400-350)
= 15 + 50
= 65
Portfolio return = 65/350
= 0.19
What is your annualized return?

3

Annualized return = ((total value/initial value) ^ (1/total years)) – 1
= ((415/350) ^ (1/4) – 1
= 0.0435
= 0.04
...

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