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s07-hw-stocks

# s07-hw-stocks - Dylan Reid IE 305 Spring 2007 Stocks...

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Dylan Reid IE 305 Spring 2007 Stocks Homework Answer Sheet Instructor: Dave Sly Due: Thursday, April 19 th , 2007 1) For each of the stocks, find the opening stock price in Jan 1, 2003 (or near that) and then the price today. Now compute the average and compound returns. 1/2003 Today Avg Return Compound Return Yahoo)___9.05__,__32.02__,__59%___,___33.86% Ford)__9.68_,__7.88___,__-4%___,____-4.64% Wal-Mart)__50____,___48.21_,__-1%__,__-.84%_ Merck)___58.99__,___49.96_,___-4%__,___-3.763% 2) Year Stock Price Annual Dividends Feb1 2003 30.00 \$ 0.10 \$ Feb1 2004 31.00 \$ 0.20 \$ Feb1 2005 35.00 \$ 0.30 \$ Feb1 2006 25.00 \$ 0.30 \$ Feb1 2007 40.00 \$ 0.80 \$ Suppose that you purchase 100 shares on Feb 1, 2003 and held the shares for four years. What is the compound annual return on your investment over the holding period? (You should include the dividends in your calculation.) A)__8.7%__________ If you plan on selling the stock after 4 years from purchase and you desire a compound return of 50%? What should be the share price on February 1, 2007? (Do NOT include the dividends in your calculation.) B)__\$151.37_______ If the stock price drops to \$35 on February 1, 2007, what would be your compound

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