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Chapter 1 Problems 1-21 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-in" be installed in Excel. To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak and "Solver Add-In." mailto:[email protected]?subject=Question for Investment (A7835200 Investment Management)

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Chapter 1 Question 1 Calculating returns Input Area: Shares purchased 100 Initial price \$65.00 Dividend paid \$1.70 End price \$73.00 Output Area: Total dollar return \$970.00 =D7*(D9+D10-D8) Whether you choose to sell the stock or not does not affect the gain or loss for the year; your stock is worth what it would bring if you sold it. Whether you choose to do so or not is irrelevant (ignoring commissions and taxes).

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Chapter 1 Question 2 Calculating yields Input Area: Shares purchased 100 Initial price \$65.00 Dividend paid \$1.70 End price \$73.00 Output Area: Capital gains yield 12.31% =(D10-D8)/D8 Dividend yield 2.62% =D9/D8 Total rate of return 14.92% =D16+D17
Chapter 1 Question 3 Calculating returns Input Area: Shares purchased 750 Initial price \$65.00 Dividend paid \$1.70 End price \$56.25 Output Area: Dollar return \$(5,287.50) =D7*(D9+D10-D8) Capital gains yield -13.46% =(D10-D8)/D8 Dividend yield 2.62% =D9/D8 Total rate of return -10.85% =D17+D18

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Chapter 1 Question 4 Historical returns Output Area: 1926-2002 Table 1.3 Average return Risk Premium Long-term government bonds 5.8% 2.0% Treasury bills 3.8% 0.0% Large stocks 12.2% 8.4% Small stocks 16.9% 13.1%
Chapter 1 Question 5 Calculating average returns Input area: Year Jurassic Stonehenge 1 18% 4% 2 28% 10% 3 -22% -3% 4 6% 8% 5 9% 6% Output area: Year Jurassic Stonehenge 1 0.18 0.04 2 0.28 0.10 3 (0.22) (0.03) 4 0.06 0.08 5 0.09 0.06 Total 0.39 0.25 Average return 7.80% 5.00%

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Question 6 Calculating returns and variability Input area: Year A B 1 16% 38% 2 5% -5% 3 -10% -10% 4 32% 21% 5 11% 17% Output area: A B Year Deviation Deviation 1 0.16 0.052 0.380 0.258 2 0.05 (0.058) (0.050) (0.172) 3 (0.10) (0.208) (0.100) (0.222) 4 0.32 0.212 0.210 0.088 5 0.11 0.002 0.170 0.048 Total
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