HallHomework4

HallHomework4 - 4.1 + 7.6 = 11.7% b. Expected return on...

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FI360: Week 4 Homework Randall Hall Problem 6-1 a. 1000 x (1.25 + 4) = 1000 / 5.25 = 5250 b. (49 + 1.25 - 45) / 45 = 5.25 / 45 = 0.116667 = 11.67% c. No, it wouldn’t matter if you sell it or continue to hold – same answers. Problem 6-2 0.10 = (32.50 + d - 30) / 30 3 = 32.50 + d -30 33 = 32.50 + d .5 = d So, the dividend was $0.50 Problem 7-1 a. Current treasury bills return: 1.5 + 7.6 = 9.1% Historical treasury bill return:
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Unformatted text preview: 4.1 + 7.6 = 11.7% b. Expected return on stocks now: 6.5 + 4.5 = 11% Expected return on stocks based on historical numbers: 5.2% + 6.5% = 11.7% c. Treasury bill returns seem to fluctuate, and current stock returns are better predictors of future stock returns than historical return rates. Problem 7-3 (10% - 4%) + 2% = 8% So, the expected return for W.M. Hung Corporation is 8%....
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This note was uploaded on 07/10/2011 for the course FI 360 taught by Professor Tavbin during the Fall '08 term at Park.

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