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Chapter Nine Questions

# Chapter Nine Questions - Returns 9.1 One year ago you...

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Returns 9.1 One year ago, you bought 500 shares of Webster, Inc. stock at \$37 per share. You just received a dividend of \$1,000 and Webster stock now sells for \$38. a. How much did you earn in capital gains? b. What was your total dollar return? c. What was your percentage return? d. Must you sell the stock to include the capital gain in your return? 9.2 One year ago, Mr. Seth Cohen invested \$10,400 in 200 shares of First Industries, Inc. stock and just received a dividend of \$600. Today, he sold the 200 shares at \$54.25 per share. a. What was his capital gain? b. What was his total dollar return? c. What was his percentage return? d. What was the stock’s dividend yield? 9.3 You purchased a stock one year ago at \$42 per share. The stock just paid a dividend of \$2.40 per share. Today, you sold the stock at \$31 per share. What is the percentage return on this stock? 9.4 Lydian Stock currently trades at \$52 per share. You intend to buy the stock today and hold it for two years. Two years from today, you expect to sell the stock at \$54.75 per share. What is the expected holding period return on the stock? 9.5 Calculate the average real annual returns for each of the following asset classes using the information below: Series Mean of Annual Total Return (1926-2002) Large Company Stocks 12.2% Long-Term Corporate Bonds 6.2 Long-Term Government Bonds 5.8 U.S. Treasury Bills 3.8 Inflation 3.1 a. Large-company stocks b. Long-term corporate bonds c. Long-term government bonds d. U.S. Treasury bills 9.6 Suppose the current interest rate on U.S. Treasury bills is 2 percent. The average return on Treasury bills from 1926 through 2002 was 3.8 percent. The average return on common stocks during the same period was 12.2 percent. Given this information, what is the current expected return on common stocks. 9.7

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Chapter Nine Questions - Returns 9.1 One year ago you...

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