USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) The common stock of XMen h

Question

USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) The common stock of XMen had the following historic prices. 3/01/1999 3/01/2000 3/01/2001 3/01/2002 3/01/2003 3/01/2004 Price of XMen 50.00 47.00 76.00 80.00 85.00 90.00 20. What was your holding period return for the time period 3/1/1999 to 3/1/2004? a. 0.1247 b. 1.8000 C. 0.1462 d. 0.4000 e. 0.2500 HPR Ending Value/Beginning Value 90/501.8 21. What was your annual holding period yield (Annual HPY)? a. 0.1247 b. 1.8000 c. 0.1462 d. 0.4000 e. 0.2500

Explanation / Answer

Solution:

Q20

Value in 1999 = 50

Value in 2004 = 90

Return in 5 Years = 90-50 = 40

Holding period return = (Ending price - Beginning price / Beginning price) = (90-50/50) = 40/50 = 80%

So answer should be 0.80 or 80% ...

None of the option looks correct,

Q21

Annual holding period return = (1+Holding period return)^1/Year -1 = (1+0.80)^1/5 - 1 = 1.1247-1 = 0.1247

Option A is correct

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