Suppose you created a portfolio exactly 5 years ago of the following assets: Com
ID: 2651963 • Letter: S
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) _______________
ASSETS NUMBER PRICECommon Stock A
pays a constant dividend of $.30 per quarter
245 shares
$28.15Coupon Bonds B
- CR = 7.85%; YTM = 8.15%
25 bonds
$1131.24Preferred Stock C
2% Dividend Yield, $80 face value
80 shares
$76.12Zero Coupon Bonds D
Face value = $1,000
40 bonds
$872.35Explanation / Answer
A) Total dollar return of the portfolio = Dollar return of Asset A + Dollar return of Asset B + Dollar return of Asset C + Dollar return of Asset D
= 245 * [($33.67 - $28.15) + $0.30 * 4 *5] + 25 * [($997.15 - $1131.24) + 7.85% * $1000] + 80 * [($84.25 - $76.12) + 2% * $80] + 40 * ($831.15 - $872.35)
= $2822.40 - $1389.75 + $778.40 - $1648.00
= $563.05
B) Percentage return (HPR) = [Total value at the end of 5 years / Initial value - 1] * 100%
= [(245 * $28.15 + 25 * $1131.24 + 80 * $76.12 + 40 * $872.35 + $563.05) / (245 * $28.15 + 25 * $1131.24 + 80 * $76.12 + 40 * $872.35) - 1] * 100%
= [($76161.35 + $563.05) / $76161.35 - 1] * 100%
= 0.7392%
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