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Problem Set 5 solutions

# Problem Set 5 solutions - F301 Financial Management Problem...

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F301 Fall 2010 Page 1 of 4 F301 Financial Management Problem Set 5 Fall 2010 Each part of each problem is worth three points. Total points possible = 39. Remember to show your work. 1. One year ago, on November 5, you bought shares of stock in the Coca-Cola co The stock price at that time was \$54.50 per share. After one year, you sold the at a price of \$62.50 per share. You also received a dividend of \$1.76 per share a. What was the dividend yield on your investment? What was the capital ga your investment? b. Compute the total nominal return on your investment. c. If the inflation rate during the year was 3%, what was your total real rate o 2. Five years ago, an investor purchased shares of Company B for \$50.00 per sha annual returns on the stock are shown below. Use this information to answer q below. 1 2 3 4 5 9% 4% -3% -6% 12% a. If the stock never paid any dividends, what is the stock price today? b. What was the arithmetic average return? Please show your answer as a pe four decimal places.

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