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Unformatted text preview: 1. Suppose you bought a share of Lockheed Martin at the opening price of $77.30 a share on Tuesday, November 24, 2009. You sold the stock on Friday, December 4, 2009, at the closing price of $78.21 a share. The company paid out $0.63 per-share regular dividend on Friday, November 27, 2009. a. Ignoring transaction costs what was the 11-day HPR of this investment? Holding period return (HPR) is the change in the total value of an investment per dollar of the initial cash outflow over a period of time. It is the sum of the dividend yield and the capital gains yield. Thus, 11-day HPR= $0.63/$77.30+$78.21-$77.30/$77.30=+1.992% b. What was the APR and the EAR of this investment? (Assume that a year is 363 days.) Annual percentage rate (APR) is the periodical interest rate times the number of periods in a year and there are 363/11=33 11-day periods in a year. Thus, APR=0.01992x33=+65.736% Effective annual rate (EAR) is the annual interest rate that is actually paid or received. Applying the EAR formula we get EAR=(1+0.65736/33)^33 1=+91.726% 2. Suppose you bought a share of Boeing at the opening price of $48.70 a share on Friday, October 30, 2009. You sold the stock on Friday, November 13, 2009, at the closing price of $50.68 a share. The company paid out $0.42 per-share regular dividend on Wednesday, November 4, 2009. a. Ignoring transaction costs what was the 15-day HPR of this investment?...
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- Spring '10