Problem Set 5

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

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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 company. The stock price at that time was $54.50 per share. After one year, you sold the shares 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 gain return on 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 of return? 2. Five years ago, an investor purchased shares of Company B for $50.00 per share. The annual returns on the stock are shown below. Use this information to answer questions 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 percent with four decimal places. c.
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This note was uploaded on 01/13/2011 for the course BUS A202 taught by Professor Tindall during the Spring '10 term at IUPUI.

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

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