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review_slides01 - Exam 1 review HW 9#1 Given that Millcom...

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Exam 1: review
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HW 9, #1 Given that Millcom International Cellular was up by over 1,200 per- cent for 2003, why didn’t all investors hold Millcom International Cellular? 2
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HW 9, #2 We have seen that, over long periods of time, stock investments have tended to substantially outperform bond investments. How- ever, it is not at all uncommon to observe investors with long horizons holding entirely bonds. Are such investors irrational? 3
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HW 9, #3 Suppose a stock had an initial price of $64 per share, paid a divi- dend of $1.75 per share during the year, and had an ending share price of $72. Compute the percentage total return. 4
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HW 9, #4 Suppose you bought a 9 percent coupon bond one year ago for $1,050. The bond sells for $1,080 today. (a) Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? (b) What was your total nominal rate of return on this invest- ment over the past year? (c) If the inflation rate last year was 4 percent, what was your total real rate of return on this investment?
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