You read that stock A is trading for $50 and is down 50% for the year. Stock B is also trading for
$50 but has risen 100% for the year. If the investor had purchased 1 share of each stock at the
beginning of the year, what can you conclude has happened to
Finance 354-Investments
Jason Dickson
Chapter 14
1.
a) The current price of the bond if comparable interest is 8 percent (or the bond is sold at par)
will be $1,000. If the Coupon rate is equal to the yield, then the current price of the bond is equal
to
You are offered $900 5 years from now or $150 at the end of each year for the next 5 years.
If you can earn 6% on your funds, which offer will you accept?
$900
$150 x 5.637 (FV of an annuity) = $846
In this case I would choose to receive $900 in 5 years b
You want $100,000 after 8 years in order to start a business. Currently, you have $26,000, which
may be invested to earn 7% annually.
How much additional money must you set aside each year if the funds also earn 7% in order to
meet your goal of $100,000 a
A saver wants $100,000 after 10 years and believes that it is possible to earn an annual rate of
8% on invested funds.
a) What amount must be invested each year to accumulate $100,000 if (1) the payments are
made at the beginning of each year or (2) if th
An investor bought a stock 10 years ago for $20 and sold it today for $35. What is the annual
rate of growth (rate of return) on the investment?
Po (1 + x) n = Pn
20 (1 + x) 10 = 35
35/20 = 1.75 (1 + x) 10 = 1.75
On the FV table, after 10 years the intere
A speculator sells a stock short for $50 a share. The company pays a $2 annual cash dividend.
After a year has passed, the seller covers the short position at $42. What is the percentage return
on the position?
($50 - $42 - $2) / $50 x 100% =
$6 / $50 x 1
A stock sells for $10 per share. You purchase 100 shares for $10 a share (i.e., for $1000), after a
year price rises to $17.50? What will be the percentage return on your investment if you bought
the stock on margin and the margin requirement was a) 25 pe
A saver places $1,000 in a certificate of deposit that matures after 20 years and that each year
pays 4% interest, which is compounded annually until the certificate matures.
a) How much interest will the saver earn if the interest is left to accumulate?
An investor sells a stock short for $36 a share. A year later, the investor covers the position at
$30 a share. If the margin requirement is 60 percent, what is the percentage return earned on the
investment? Redo the calculations, assuming the price of t
A firm has the following items on its balance sheet:
Cash
Inventory
Notes payable to the bank
Common Stock
($10 par; 1,000,000 shares outstanding)
Retained earnings
$20,000,000
134,000,000
31,500,000
10,000,000
98,500,000
Describe how each of these accoun
A portfolio consists of assets with the following expected returns:
Real Estate
Low-Quality bonds
AT&T stock
Savings account
Expected return
16%
15%
12%
5%
Weight in portfolio
20%
10%
30%
40%
a) What is the expected return on the portfolio?
.16 x .20 + .1
A township expects its population of 5,000 to grow annually at a rate of 5%. The township
currently spends $300 per inhabitant, but, as the result of inflation and wage increments, expects
the per capita expenditure to grow annually by 7%. How much will t
Irina Hawk
FINC 354
Home Work Week 1
11/1/2014
Chapter 2: 1,3,7,8
Chapter 3: 1, 3, 8, 16, 20, 23
1. A stock sells for $10 per share. You purchase 100 shares for $10 a share, and after
a year the price rises to $17.50
What will be the percentage return on
You are given the following information concerning 2 stocks:
Expected Return
Standard deviation of the expected return
Correlation coefficient of the returns
A
10%
3.0
B_
14%
5.0
- .1
a) What is the expected return on a portfolio consisting of 40% in stoc
FINC 354
Chapter 5
Question 1:
a) An individual in the 28% federal income tax bracket and 15% long-term capital gains tax
bracket brought and sold the following securities during the year:
Cost basis of stock
$24,500
$35,400
$31,000
Proceeds of sale
ABC
$
What is the beta of a portfolio consisting of 1 share of each of the following stocks given their
respective prices and beta coefficients?
Stock
A
B
C
D
Price
$10
$24
$41
$19
Beta
1.4
0.8
1.3
1.8
Number stocks
1
1
1
1
Total
Investment in Stock
$10 x 1.4 =
A stock costs $80 and pays a $4 dividend each year for 3 years.
a) If an investor buys the stock for $80 and expects to sell it for $100 after 3 years, what is
the anticipated annual rate of return?
(PV annuity + PV of $1)
$80 = $4(2.402) + $100(.712) = 9
Week 2 homework
Chapter 5
1. A) An individual in the twenty-eight percent federal income tax bracket and fifteen
percent long-term capital gains tax braket bought and sold the following securities. What
are the taxes owed on the short term capital gains?
You are 60 years old. Currently, you have $10,000 invested in an IRA and have just received a
lump-sum distribution of $50,000 from a pension plan, which you roll over into an IRA. You
continue to make $2,000 annual payments to the regular IRA and expect
Home Work Week 3
Irina Hawk
Chapter 9: problems 2, 4, 7
Chapter 10: problems 4, 11, 13, 17
2. An investor requires a return of 12 percent on risky securities. A stock sells for $25, it
pays a dividend of $1, and the dividends compound annually at 7 percen
A company whose stock is selling for $60 has the following balance sheet;
Assets
$30,000,000
Liabilities
$14,000,000
Preferred stock
1,000,000
Common stock
1,200,000
($12 par 100,000 shares outstanding)
Paid in capital
1,800,000
Retained earnings
12,000,0
Home Work Week 3
Chapter 9: problems 2, 4, 7
Chapter 10: problems 4, 11, 13, 17
2. An investor requires a return of 12 percent on risky securities. A stock sells for $25, it
pays a dividend of $1, and the dividends compound annually at 7 percent. Will thi
Christopher Jones
Professor Shailendra Verma
FINC 354: Investments
23 September 2017
Homework 4
Chapter 8
1. A firm has the following items on its balance sheet:
Cash
$20,000,000
Inventory
$134,000,000
Notes payable to bank
$31,500,000
Common stock ($10 p
FINC 354 DISCUSSION 9
What is the capital market line? Who uses it? Would you use it? Who discovered it? How does
the capital market line relate to the security market line?
The capital market line (CML) is a line that is used to show the rates of return,
FINC 354 DIS 6
Bond Valuation. Why are bonds considered as less risky investments than as stocks? Discuss
duration and portfolio immunization.
Bonds are considered less riskier investments than stocks for a few reasons. Some of the reasons
are that bond p
Christopher Jones
Professor Shailendra Verma
FINC 354: Investments
16 September 2017
Homework 3
Chapter 9
2. An investor requires a return of 12% on risky securities. A stock sells for $25, it pays a dividend of $1,
and the dividends compound annually at
Christopher Jones
Professor Shailendra Verma
FINC 354: Investments
29 August 2017
Homework 1
Chapter 2
1. A stock sells for $10 per share. You purchase 100 shares for $10 a share (i.e., for $1,000), and after a
year the price rises to $17.50. What will be
Christopher Jones
Professor Shailendra Verma
FINC 354: Investments
16 September 2017
Homework 2
Chapter 4
1. a) An individual in the 28 percent federal income tax bracket and 15 percent long-term capital gains
tax bracket bought and sold the following sec