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Chapter_10_sol_students

# 3historicalreturnsofstocksandbonds skillanalytical

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Unformatted text preview: dard errors. C) D) Diff: 2 Topic: 10.3 Historical Returns of Stocks and Bonds Skill: Conceptual 7) If a stock pays dividends at the end of each quarter, with realized returns of R1, R2, R3, and R4 each quarter, then the annual realized return is calculated as A) Rannual = B) Rannual = (1 + R1)(1 + R2)(1 + R3)(1 + R4) C) Rannual = (1 + R1)(1 + R2)(1 + R3)(1 + R4) - 1 D) Rannual = R1 + R2 + R3 + R4 Answer: C Explanation: A) B) C) D) Diff: 2 Topic: 10.3 Historical Returns of Stocks and Bonds Skill: Analytical Use the table for the question(s) below. Consider the following Price and Dividend data for Ford Motor Company: Date December 31, 2004 January 26, 2005 April 28, 2005 July 29, 2005 October 28, 2005 December 30, 2005 Price (\$) \$14.64 \$13.35 \$9.14 \$10.74 \$8.02 \$7.72 Dividend (\$) \$0.10 \$0.10 \$0.10 \$0.10 8) Assume that you purchased Ford Motor Company stock at the closing price on December 31, 2004 and sold it at the closing price on December 30, 2005. Your realized annual return is for the year 2005 is closest to: A) -45.1% B) -44.5% C) -48.5% D) -47.3% Answer: A D Price (\$) Dividend (\$) Return (1 + return) Explanation: A) ate December 31, 2004 January 26, 2005 April 28, 2005 July 29, 2005 October 28, 2005 December 30, 2005 \$14.64 \$13.35 \$9.14 \$10.74 \$8.02 \$7.72 \$0.10 \$0.10 \$0.10 \$0.10 The Product of (1 + returns) - 1 = -8.13% -30.79% 18.60% -24.39% -3.74% 1 0.918716 0.692135 1.185996 0.756052 0.962594 1 0.918716 0.635875 0.754145 0.570173...
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