Environment of Financial Management and Evaluation of Financial Performance.Doc Uploaded Successfully
Business and Management
Submitted By silvestrigang
2. An investor bought 100 shares of Venus Corporation common stock one year ago for $40 per share. She just sold the shares for $44 each, and during the year, she received four quarterly dividend checks for $40 each. She expects the price of the Venus shares to fall to about $38 over the next year. Calculate the investor’s realized percentage holding period return.
Realized percentage holding period return:
= [(4400 - 4000 + 4(40))/4000] x 100%
Since the stock has been sold, next year’s expected price performance is irrelevant.
3. An investor bought 10 Ellis Industries, Inc., long-term bonds one year ago, when they were first issued by the company. In addition, he bought 200 shares of the company’s common stock at the same time for $30 per share. He paid $1,000 each for the bonds, and today, the bonds are selling at $950 each (long-term interest rates have increased slightly over the past year). The bonds have a stated interest rate of 12 percent per year. The investor received an interest payment equaling $60 per bond six months ago and has just received another $60 per bond interest payment. Calculate the investor’s percentage holding period return for the one year he has held the bonds.
Percentage holding period return
= [(9,500 - 10,000 + 2(600))/10,000] x100%
4. Suppose a U.S. Treasury bill, maturing in 30 days, can be purchased today for $99,500. Assuming that the security is held until maturity, the investor will receive $100,000 (face amount). Determine the percentage holding period return on this investment.
500 / 99500 = 0.5%
6. a. National Telephone and Telegraph (NTT) Company common stock currently sells for $60 per share. NTT is expected to pay a $4 dividend during the coming year, and the price of the stock is expected to increase to $65 a year from now. Determine the expected (ex ante)...