Ch12sol - H12.1 Solution to Problem 12.1 12.1 Calculating...

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H12.1. Solution to Problem 12.1 12.1. Calculating Returns: Suppose a stock had an initial price of €64 per share, paid a dividend of € 1.25 per share during the year, and had an ending share price of € 72. Compute the percentage total return. The return of any asset is the increase in price, plus any dividends or cash flows, all divided by the initial price. The return of this stock is: R = [(€72 – 64) + 1.25] / €64 = .1445 or 14.45%
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H12.2. Solution to Problem 12.2 12.2. Calculating Yields: In Problem 1, what was the dividend yield? The capital gains yield? The dividend yield is the dividend divided by price at the beginning of the period price, so: Dividend yield = $1.25 / $64 = .0195 or 1.95% And the capital gains yield is the increase in price divided by the initial price, so: Capital gains yield = ($72 – 64) / $64 = .1250 or 12.50%
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H12.3. Solution to Problem 12.7 12.7. Calculating Returns and Volatility: Using the following returns, calculate the arithmetic average returns, the variances, and the standard deviations for X and Y. Year X Y 1 14% 20% 2 29 - 7 3 - 9 -12 4 8 56 5 17 3 The average return is the sum of the returns, divided by the number of returns. The average return for each stock was: . Avg(X) = (.14 + .29 – .09 + .08 + .17) / 5 = .1180 or 11.8% Avg(Y) = (.20 - .07 - .12 + .56 + .03) / 5 = .12 or 12% Remembering back to “statistics,” we calculate the variance of each stock as: Var(X) = [(.14-.1180) 2 +(.29-.1180) 2 +(-.09-.1180) 2 +(.08-.1180) 2 +(.17-.1180) 2 ] /(5-1) = .019370 Var(Y) = [(.20-.12) 2 +(-.07-.12) 2 +(-.12-.12) 2 +(.56-.12) 2 +(.03-.12) 2 ]/(5-1) = .075450
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H12.4. Solution to Problem 12.7 (continued) The standard deviation is the square root of the variance, so the standard deviation of each stock is: s X = (.01937) 1/2 = .1392 or 13.92% s Y = (.07545) 1/2 = .2747 or 27.47%
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H12.5. Solution to Problem 12.9
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This note was uploaded on 04/13/2010 for the course TECHNOLOGY 032913 taught by Professor Hong during the Spring '08 term at 서울대학교.

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Ch12sol - H12.1 Solution to Problem 12.1 12.1 Calculating...

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