Finance Mba

1470 Words Nov 16th, 2015 6 Pages
1. Calculating Returns
Suppose a stock had an initial price of $84 per share, paid a dividend of $1.40 per share during the year, and had an ending share price of $96. Compute the percentage total return.

The percentage total return is (96-84+1,40)/84=0,1595=15,95%

2. Calculating Yields
In Problem 1, what was the dividend yield? The capital gains yield?

Capital gain yield: (96-84)/84=0,1429=14,29%
Dividend yield: 1,40/84=0,167=1,67%

3. Calculating Returns and Variability
You’ve observed the following returns on Yasmin Corporation’s stock over the past five years: 19 percent, -13 percent, 24 percent, 31 percent, and 8 percent. a. What was the arithmetic average return on Yasmin’s stock over this five-year period? b.
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large company standard deviation: 24,11

t bills standard deviation: 1,23

c.
-14.69-7.29) + (-26.47-7.99) + (37.23 – 5.87) + (23.93 – 5.07) + (-7.16 – 5.45) + (6.57- 7.64) = -19.9%

Arithmetic average risk premium: -19.90/6= -3.32%

Standard deviation of the risk premium: 24.91

6. Systematic versus Unsystematic Risk
Indicate whether the following events might cause stocks in general to change price, and whether they might cause Big Widget Corp.’s stock to change price. Provide a rationale for each response.
a. The government announces that inflation unexpectedly jumped by 2 percent last month.
Since it is an unexpected systematic event, prices will be most likely to drop.
b. Big Widget’s quarterly earnings report, just issued, generally fell in line with analysts’ expectations.
Since this is an expected event, the price will remain constant.
c. The government reports that economic growth last year was at 3 percent, which generally agreed with most economists’ forecasts.
Since new intel are in line with the previous forecasts, price will remain constant.
d. The directors of Big Widget die in a plane crash.
Since the event couldn’t be expected and would change the general direction of the company, the price will be likely to drop. e. Congress approves changes to the tax code that will increase the top marginal corporate tax rate. The legislation had been debated for the previous

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