Question 1 You purchase a stock at the beginning of the year for $76.20 a share.

Question

Question 1

You purchase a stock at the beginning of the year for $76.20 a share. Your total return for the year was 12.6 percent and the dividend yield was 3.2 percent. What was the price of the stock at the end of the year?

$69.65

$74.07

$83.36

$85.80

$89.22

4 points

Question 2

An asset has an arithmetic average return of 12 percent, a geometric average return of 9.6 percent, and a standard deviation of 22 percent. What range of returns would you expect to see 95 percent of the time?

-54.0 to +78.0 percent

-34.4 to +53.6 percent

-32.0 to +56.0 percent

-12.4 to +31.6 percent

-10.0 to +34.0 percent

3 points

Question 3

A stock had returns of 11, 14, -6, and 7 percent over the past four years, respectively. What was the average geometric return?

6.21 percent

6.50 percent

8.01 percent

8.37 percent

9.45 percent

3 points

Question 4

Terry recently purchased 200 shares of Magna Corp. stock for $36.50 a share. His broker required a cash payment of $6,570, plus trading costs, for the purchase. What was the initial margin requirement on this particular stock?

70 percent

75 percent

80 percent

90 percent

100 percent

3 points

Question 5

Three months ago, you purchased 700 shares of a stock for $22 a share. Today, you sold those shares for $24 a share. What was your annualized rate of return on this investment?

9.09 percent

19.01 percent

36.36 percent

38.80 percent

41.63 percent

3 points

Question 6

Casper thought that ACAP stock was ready to decline so he short sold 600 shares at $22 a share on margin. The initial margin was 60 percent and the maintenance margin is 40 percent. What is the highest the stock price can go before he receives a margin call?

$23.08

$24.27

$25.14

$26.11

$27.47

3 points

Question 7

A stock sells for $12.95 a share and has a required return of 13.5 percent. Dividends are paid annually and increase at a constant 3 percent each year. What is the amount of the last dividend paid?

$1.22

$1.28

$1.32

$1.36

$1.40

3 points

Question 8

Naples Vacation Rentals has 60,000 shares of stock outstanding at a market price of $29.28 per share and a book value of $17.27 a share. The firm has earnings per share of $2.44, a dividend payout ratio of .35, and a P/E ratio of 12. What is the firm's sustainable rate of growth?

8.88 percent

9.18 percent

11.11 percent

12.57 percent

14.13 percent

3 points

Question 9

Hill's Country Fresh Eggs is a relatively young firm which just paid their first annual dividend of $.40 a share. Management projects dividend increases of 15 percent per year for five years followed by a constant growth rate of 3 percent annually. What is this stock worth today if the applicable discount rate is 11 percent?

$8.37

$9.08

$9.42

$11.76

$12.45

3 points

Question 10

Ameth Growers has historically had a P/E ratio of 21.4. This ratio is considered a good estimate of the future ratio. The firm currently has EPS of $2.34. These earnings are expected to increase by 3.4 percent next year. What is the expected price of this stock one year from now?

$45.54

$48.43

$50.25

$51.78

$53.79

$69.65

$74.07

$83.36

$85.80

$89.22

Explanation / Answer

Question 1:

Price of the stock at the end of the year = $76.20 * 12.6% - 3.2% * $76.20 + $76.20

= $83.36

Question 2:

Range = 12% - 1.96 * 22% to 12% + 1.96 * 22%

= -31.12% to 55.12%

Therefore, -32% to 56%

Question 3:

Geometric average = [(1+11%) * (1+14%) * (1-6%) * (1+7%)]1/4 - 1

= 6.21%

Question 4:

Margin requirement = $6,570 / 200 * $36.50 * 100%

= 90%

Question 5:

Annualized return = ($24 / $22)12/3 - 1

= 41.63%

Question 6:

60% margin = 600 * $22 * 60%

= $7,920

40% margin = 600 * $22 * 40%

= $5,280

Therefore, margin call comes when the stock price goes up by = ($7,920 - $5,280) / 600

= $4.40

Therefore, the highest stcok price is $26.40 (=$22 + $4.40)

Given the option it should $26.11

Question 7:

Stock price = Dividend last year * (1 + Dividend growth) / (Required return - Dividend growth)

=> $12.95 = Dividend last year * (1 + 3%) / (13.5% - 3%)

=> Dividend last year = $1.32

.....Too many questions in a single go

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