Chapter 10, Problem 6 Using the data in the following table, calculate the retur
ID: 2713717 • Letter: C
Question
Chapter 10, Problem 6
Using the data in the following table, calculate the return for investing in Boeing stock (BA) from January 2, 2008, to January 2, 2009, and also from January 3, 2011, to January 3, 2012, assuming all dividends are reinvested in the stock immediately.
Historical Stock and Dividend Data for Boeing
Date
Price
Dividend
Date
Price
Dividend
1/2/2008
86.62
1/3/2011
66.40
2/6/2008
79.91
0.40
2/9/2011
72.63
0.42
5/7/2008
84.55
0.40
5/11/2011
79.08
0.42
8/6/2008
65.40
0.40
8/10/2011
57.41
0.42
11/5/2008
49.55
0.40
11/8/2011
66.65
0.42
1/2/2009
45.25
1/3/2012
74.22
Chapter 11, Problem 5
Using the data in the following table, estimate
The average return and volatility for each stock
The covariance between the stocks
The correlation between these two stocks.
Stock A
Stock B
Historical Stock and Dividend Data for Boeing
Date
Price
Dividend
Date
Price
Dividend
1/2/2008
86.62
1/3/2011
66.40
2/6/2008
79.91
0.40
2/9/2011
72.63
0.42
5/7/2008
84.55
0.40
5/11/2011
79.08
0.42
8/6/2008
65.40
0.40
8/10/2011
57.41
0.42
11/5/2008
49.55
0.40
11/8/2011
66.65
0.42
1/2/2009
45.25
1/3/2012
74.22
Explanation / Answer
Since, two independent questions have been posted with subparts, the first one (problem 6) has been answered.
___________
Problem 6
The return has been calculated with the use of following table:
January 2, 2008, to January 2, 2009
_________
January 3, 2011, to January 3, 2012
Date Holding Period Return 1+ Holding Period Return 2/6/2008 -0.0728 [(79.91+.40)/86.62 - 1] 0.93 5/7/2008 0.0631 [(84.55 + .40)/79.91 - 1] 1.06 8/6/2008 -0.2218 [(65.40 +.40)/84.55 - 1] 0.78 11/5/2008 -0.2362 [(49.55 + .40)/65.40 - 1] 0.76 1/2/2009 -0.0868 [(45.25 +0)/49.55 - 1] 0.91 Total Return (.93*1.06*.78*.76*.91) - 1 = -46.50%Related Questions
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