Whether the price change surprising.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 2

Question

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

Answer 6

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Answer 7

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Answer 8

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

Answer 13

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Answer 14

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.