Fall 2011 ADMS 3531 Assignment1 Sol

Fall 2011 ADMS 3531 Assignment1 Sol - AP/ADMS 3531, Fall...

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AP/ADMS 3531, Fall 2011 Professors Domian and Yildirim Homework Assignment #1 This assignment consists of 6 questions beginning on the next page. Your answers are due in class in the fourth week of the semester (see course outline), in the section for which you are registered. You are welcome to submit your assignment early, to the Admin Studies General Office (282 Atkinson). This is not a group project! Work by yourself, and your answers must be handwritten (except you can include an Excel printout for Question 3). Please keep a photocopy of your answers. Solutions will be posted on the class website on Thursday October 6. Your photocopy will allow you to check your work, and will also serve as proof that you handed in the assignment. It is hoped, but not guaranteed, that the assignments will be marked and available for your pick-up before the midterm exam. This assignment will be graded on a 100-point scale, and will be worth 5% of your course grade. Please sign the personal work statement in the box below and include it with your assignment. (It is recommended that you print out this entire page and staple it in front of your answers.) Personal Work Statement I, the undersigned: warrant that the work submitted herein is my work and not the work of others acknowledge that I have read and understood the Senate Policy on Academic Honesty (see http://www.yorku.ca/secretariat/policies/document.php?document=69 ) acknowledge that it is a breach of the University Regulations to give or receive unauthorized assistance on a graded piece of work Name (typed or printed) York Student # Signature Please check your section: Section A, Tuesday 7 pm, Professor Domian Section B, Thursday 2.30 pm, Professor Yildirim Guidelines for rounding: If you are using percents, for example 1.23%, then you should use two decimal places for your calculations. If the same number is converted to decimal form, as 0.0123, then use four decimal places throughout your calculations. Dollar amounts, for example a share 1
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price of $12.34, should be rounded to the nearest cent. However, if there are no pennies, such as 100 shares worth $12 per share, then use integer dollar amounts. 1. You have the following information regarding recently liquidated 4 investments: Investment Quantity Purchase Price Holding Period Income Sale Price Holding Period Stock A 150 $27.50 $0.40 $28.75 6 months Stock B 80 $5.25 $0.10 $5.35 13 weeks Bond C 20 $1003.50 $65.00 $1010.25 2 years Bond D 10 $985.25 $57.50 $980.00 365 days (a) What is the holding period percentage return (HPR) for each of these investments? (4 marks) Stock A HPR=(28.75+0.40)/ 27.5 – 1 = 6% Stock B HPR=(5.35+0.10)/ 5.25 – 1 = 3.81% Bond C HPR=(1010.25+65)/1003.50 – 1 = 7.15% Bond D HPR=(980+57.50)/985.25 – 1 = 5.3% (b) Determine the effective annual rate (EAR) for each of the investments. (4 marks) Stock A EAR=(1.06)^2 -1= 12.4% Stock B EAR =(1.0381)^4– 1 =16.1% Bond C EAR =(1.03715)^0.5– 1 =3.5% Bond D EAR =(1.053)^1– 1 =5.31%
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Fall 2011 ADMS 3531 Assignment1 Sol - AP/ADMS 3531, Fall...

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