CHAPTER06 - SolutionsManual,TheMathematicsofMoney CHAPTER 6...

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Solutions Manual,  The Mathematics of Money CHAPTER 6 EXERCISES 6.1 1. (257 shares)($0.84 per share) = $215.88 2. (1,378 shares)($0.35 per share) = $482.30 3. a. $37,560/(3000) = $12.52 per share b. (1,445 shares)($12.52 per share) = $18,091.40 4. a. There are a total of 18+14+16=48 shares. Pacioli: (18/48)($127,309) = $47,740.86 Mellis: (14/48)($127,309) = $37,131.78 Dafforne: (16/48)($127,309) = $42,436.32 b. (1/3)($127,309) = $42,436.32 5. a. There are a total of 6+5+4=15 shares. Cindy: (6/15)($3,645) = $1,458 Jim: (5/15)($3,645) = $1,215 Shawn: (4/15)($3,645) = $972 b. (1/3)($3,645) = $1,215 6. $0.84 per quarter works out to 4($0.84) = $3.36 per year $3.36/$42.45 = 7.92% 7. $0.575 per quarter is 4($0.575) = $2.30 per year $2.30/$108.45 = 2.12% 8. a) $1.35 per quarter is 4($1.35) = $5.40 per year $5.40/$157.03 = 3.44% b) $5.25 is the total dividends paid in the past year; it should not be multiplied by 4 $5.25/$157.03 = 3.34% 9. Axerixia: $0.59 per quarter is 4($0.59) = $2.36 per year $2.36/$68.45 = 3.45% Zovaxacquin: $0.22 per quarter is 4($0.22) = $0.88 per year $0.88/$17.35 = 5.07% Even though Axerixia pays a larger dividend per share, since its shares are so much more expensive it actually turns out that Axerixia pays a higher dividend yield. 6-1
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Timothy J. Biehler 10. i = (FV/PV)^(1/n)-1 i = ($108.45/$25.09)^(1/3)-1 i = 0.6289570428 i = 62.90% 11. a) The amount of the capital gain is $52,000 - $25,000 = $27,000 b) i = (FV/PV)^(1/n)-1 i = ($52,000/$25,000)^(1/5)-1 i = 0.1577443414 i = 15.77% 12. i = (FV/PV)^(1/n)-1 i = ($30,902.17/$15,409.18)^(1/10)-1 i = .0720645734 i = 7.21% 13. i = (FV/PV)^(1/n)-1 i = ($35.15/$145.82)^(1/3) – 1 i = -0.3776480158 i = -37.76% 14. Since the stock had a 5-for-1 split, the original share has become 5 shares. So 1 share costing $145.82 has become 5 shares worth a total of 5($35.15) = $175.75. i = (FV/PV)^(1/n)-1 i = ($175.75/$145.82)^(1/3)-1 i = 0.0642069233 i = 6.42% 15. Approximately 4.75% + 4.15% = 8.90% 16. In exercise 10 we found the growth in stock price was equivalent to a 62.90% rate. So the total rate of return is approximately 62.90% + 1.25%= 64.15% 17. Since the dividends are reinvested, the future value includes the result of both capital gains and dividends. i = (FV/PV)^(1/n)-1 i = ($15,003.02/$8,453.19)^(1/12)-1 i = 4.90% 18. In Exercise 12 we calculated the rate of return from capital gains to be 7.21%. So the total rate of return is approximately 7.21% + 2.5% = 9.71% 6-2
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Solutions Manual,  The Mathematics of Money 19. a) CD: i = (FV/PV)^(1/n)-1 i = ($6,834.37/$5,000)^(1/5)-1 i = 6.45% Stock: i = (FV/PV)^(1/n)-1 i = ($9,130.94/$5,000)^(1/5)-1 i = 12.80% b) Since this was a 5-year certificate, we can safely assume that the same interest rate was in effect for the entire 5 year period. So we can use this rate to find the value at the end of 2 years. FV = PV(1+i)^n
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CHAPTER06 - SolutionsManual,TheMathematicsofMoney CHAPTER 6...

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