Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)

10th Edition

ISBN: 9780077835422

Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor

Publisher: McGraw-Hill Education

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Concept explainers

Dividend Valuation

Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that…

Dividend Discount Model

Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is…

Capital Gains Yield

It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normal…

Stock Valuation

In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.

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Textbook Question

Chapter 3.8, Problem 1EQ

Suppose you by 100 shares of stock initially selling for $50, borrowing 25% of the necessary funds from your broker; that is, the initial margin on your purchase is 25%, You pay an interest rate of 8% on margin loans.
a, How much of your own money do you invest? How much do you borrow from your broker?
b. What will be your rate of return for the following stock prices at the end of a one-year holding period?
(i) $40 (ii) $50: (iii) $60

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Chapter 2, Problem 2WM

Chapter 3.8, Problem 2EQ

Chapter 3 Solutions

Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)

Ch. 3.8 - Suppose you by 100 shares of stock initially...Ch. 3.8 - Repeat Question 1 assuming your initial margin was...Ch. 3.9 - Suppose you sell short 100 shares of stock...Ch. 3.9 - Repeat Question t (b) but now assume that the...Ch. 3 - Prob. 1PS Ch. 3 - What are some different components of the...Ch. 3 - Prob. 3PS Ch. 3 - Prob. 4PS Ch. 3 - In what cirecumstances are private placements more...Ch. 3 - Prob. 6PS

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What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).

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