PART 2

# PART 2 - 1 Suppose you bought a share of Lockheed Martin at...

This preview shows pages 1–2. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

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?...
View Full Document

{[ snackBarMessage ]}

### Page1 / 8

PART 2 - 1 Suppose you bought a share of Lockheed Martin at...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online