C298 Practice Problem Set #6 (2010 W)
Solutions will be posted on March 4, 2011
1.
Suppose you bought one share of Pouce Coupe Resorts (PCR) one year ago for $9.
Today, you received a dividend payment of $1 and sold the share for $9.50. What was
your realized return on PCR over the last year?
2.
Suppose you bought a share of Apple Computer one year ago for $51.
This morning you
received a dividend of $0.48 and sold the share for $59. What was your realized return?
3.
This morning, the Bank of Dawson Creek (BDC) paid a $2 dividend (it pays dividends once
per year) and these are expected to grow at the constant rate of 5% per year. If the
required return on BDC is 15%, calculate the current stock price of BDC.
4.
Yesterday, the Hudson Hope Computer (HHC) announced a $3 dividend to be paid in one
year's time. If the current price of HHC is $30 and the required return on HHC is 20%, what
is the (constant) growth rate consistent with the current stock price?
5.
One year ago, you purchased a newly issued, 20 year Government of Canada bond that
was issued at its par value of $1,000. The coupon rate on this bond is 7% per year and the
coupons are paid annually (you received the first coupon this morning).
Today, the bond
is priced to yield 8% and you have just sold it.
What was your return over the past year?
6.
Dilbert Conglomerated has just gone public. Over the first year, dividends are expected to
grow 18%. The next two years after that, dividend growth will be 12%. Finally, dividend
growth will settle into a rate of growth of 10% from then on. Assume the company just paid
a dividend of $1.00.
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 Spring '09
 FREEDMAN
 Standard Deviation, Variance

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