ARE143_CHAP_1

ARE143_CHAP_1 - 1 Managerial Economics (ARE) 143 University...

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1 Managerial Economics (ARE) 143 University of California, Davis Instructor: John H. Constantine Chapter 1 Problem 1 : Suppose you bought 100 shares of stock at an initial price of $73 per share. The stock paid a dividend of $0.88 per share during the following year, and the share price at the end of the year was $82. (a) Compute your dollar return on this investment. Does this answer change if you keep the stock instead of selling it? Explain. (b) What is the capital gains yield? What is the dividend yield? What is the total rate of return on the investment? (c) Now assume you bought 750 shares of the stock and the ending share price is $68.40 . Rework your answers to parts (a) and (b). Problem 2 : Use the following returns to stocks A and B to calculate each stock’s (i) arithmetic mean, (ii) variance, and (iii) standard deviation. Year A B 1 17% 21% 29 % 7 % 3- 1 4 % - 1 0 % 4 24% 26% 5 13% 15% Problem 3 : Calculate both the arithmetic and geometric means for the following set of returns.
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ARE143_CHAP_1 - 1 Managerial Economics (ARE) 143 University...

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