Suppose you created a portfolio exactly 5 years ago of the following assets: Com

Question

Suppose you created a portfolio exactly 5 years ago of the following assets:

Common Stock A

pays a constant dividend of $.30 per quarter

245 shares

Coupon Bonds B

- CR = 7.85%; YTM = 8.15%

25 bonds

Preferred Stock C

2% Dividend Yield, $80 face value

80 shares

Zero Coupon Bonds D

Face value = $1,000

40 bonds

                        Today, assets are selling as follows:

                                    A = $33.67

                                    B = $997.15

                                    C = $84.25

                                    D = $831.15

A) What is the dollar return on your portfolio over the entire 5 year period? (15 pts)

Dollar Return _____________

B) What is the percentage return (HPR) of the portfolio over the entire 5-year period? (10 pts)

Percentage Return (HPR) _______________

ASSET NUMBER PRICE

Common Stock A

pays a constant dividend of $.30 per quarter

245 shares

$28.15

Coupon Bonds B

- CR = 7.85%; YTM = 8.15%

25 bonds

$1131.24

Preferred Stock C

2% Dividend Yield, $80 face value

80 shares

$76.12

Zero Coupon Bonds D

Face value = $1,000

40 bonds

$872.35

Explanation / Answer

Answer: A) Dollar return:

Common stock A=245(33.67-28.15)+0.30*4*5*245=2822.4

bonds=25(997.15-1131.24)=-3352.25

Preferred stock C=80(84.25-76.12)+80*80*2%*5=1290.4

Zero coupon bonds=40(831.15-872.35)=-1648

Total dollar return=.-887.45

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