Chapter 3 - economy
Chapter 4 - individual risk and return
1. gain, total dollar return=$7, or 14.89%
2. loss, +1.40 per share, or 4.70%
3.1.Income=$200, cg=$1200, total=$1400
3.2. HPR=15.22%
3.3. Div yield=2.17%, cg yield=13.04% (NOTE: when looking at quotes in the financial press, dividend yields are usually annualized).
3.4. APR=30.44%, EAR=32.76%
4.1. 12.68%
4.2. 10.38%
4.3. 6.09%
4.4. 15.72%
5. Income=$600, cap loss=$1500, total dollar return= -$900, HPR= -5.29%
6.1. (1) $3.80 (2) $15 (3) $18.80; 25.07%
6.2. (1) $24.30 (2) -$16 (3) $8.30; 6.06%
6.3. (1) $450 (2) -$400 (3) $50; 0.55%
7. Bob APR=58.13%; Steve APR=34.71%
8. Your APR=16.15%; Your friend APR=17.91%
9. 6.97%, invest if we only require 6%, but if we require 8%, we don't invest
10. 5.06%, don't invest
11.1. dollar return by year: 1,250.00; 1,412.50; 2,200.00; 0; 312.50; 2,237.50; 2,050.00, as a percent: 11.11%; 11.77%; 17.09%; 0%; 2.25%; 16.57%; 13.67%
11.2. income=$4,462.50; capital gains=$5,000; total dollar return=$9,462.50; HPR=84.11%
11.3. 10.16%
12. 4.16%
13. 3.73%
14. (1) 11.17% (2) 6.15% (3) 2.02%
15.1. Arithmetic: A=11%, B=11%; geometric: A=10.75%, B=10.98%
15.2. A's returns seem more volatile, higher hi's and lower lo's
15.3 A=8.17%, B=2.37%
16.1. Arithmetic: A=8%, B=9%, C=12%; geometric: A=8%, B=8.86%, C=11.76%
16.2. Arithmetic average risk premium: A=0%, B=1%, C=4% (note that security A is the risk free asset)
16.4. A=0%, B=6.20%, C=8.22%
17.1. 4.17%
17.2. 2.34
17.3. New value: 85.47; return=2.56%
18. 3.85%
19.1. 101.01; 1.01%
19.2. 163.20; 1.01%
20.1. 100
20.2. 226.75
21 and 22.
| Transaction |
Loan
|
Equity |
Margin (+10)
|
Margin (-10)
|
| a |
2700
|
4050
|
67.27%
|
48.57%
|
| b |
10560
|
8640 |
48.99% |
40.34% |
| c |
891
|
2409 |
81.44% |
50.50% |
| d |
510
|
990
|
83.00% |
N/A
|
| e |
5418
|
7182
|
61.57% |
51.19%
|
| f |
2166
|
3534
|
69.92%
|
48.43% |
23. 60
24. 35.42
25. New equity = 4173.60, return = 24.21%
26.1. Stock=7600, loan=3040, equity=4560
26.2. if you assume the stock price changes instantly so you can ignore interest and dividends for this question: i) 69.6%, ii) 45.71%, iii) 5.00%, iv) 66.22%. Only in (iii) will there be a margin call
26.3. i) ending equity = 3147.20, return =-30.98%, ii)-9.05%, iii) +12.88%, iv) +34.81%, v)+56.74%
27.1. Loan=7500, equity =4500, assets=cash=12,000
27.2. 81.82%
27.3. 20%
27.4. 29.63
28.1. 133.33%
28.2. 68%
28.3. 13.5%
28.4. wipes out equity completely
29.1. +50%
29.2. -50%
