Problem_set_5(1)

# Problem_set_5(1) - Brandon Flowers, Josh Kahn, and Tom...

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Brandon Flowers, Josh Kahn, and Tom Lilly Investments Problem Set #5 Problem 1 D(0) \$2.00 Growth 5% Price of X \$45 D(1) 2.1 Discount Rate of X a) r= 9.67% Plow Back 0.67 PayOut Rate 0.33 Earnings 6 b) ROE 7.5% PVGO \$23.28 c) Year 1 Year 2 Year 3 Year 3 Price Payout \$2.20 \$2.42 \$2.66 \$59.85 Discount Rate 1.097 1.203 1.319 1.319 Current Value \$2.01 \$2.01 \$2.02 \$45.38 Price of Y \$51.41 V=E(D 1 )/(r-g)

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Problem 2 (a) Price-weighted index of the three stocks at t=0 \$40.67 Price-weighted index of the three stocks at t=1 \$39.67 Price-weighted index of the three stocks at t=1 -2.46% (b) Divisor of price-weighted index for second period \$39.67 = (\$22+\$15+\$41)/d d = 1.97 (c) Return on market value-weighted index for first period Initial value = \$17,800 Final value = \$18,600 Percentage change = 4.49% (d) Rate of return on equally weighted index for first period Initial value = Final value = Percentage change =
Problem 3 risk free rate 2.50% maturity in years 0.25 a) Stock Price \$197.99 Strike Price

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## Problem_set_5(1) - Brandon Flowers, Josh Kahn, and Tom...

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