Annual returns over a three-year span from portfolio

Assignment Help Accounting Basics
Reference no: EM131053495


a) If Sterling Corp.'s next dividend on preferred stock is $15 per share and is expected to grow by 3% per year, what must be the discount rate on preferred shares if shares are currently selling for $50 per preferred share?

b) If Klay purchased 35 shares of GSW Inc. for $2 per share and the price fell to $1.50 per share over the year and there was a $.50 per share dividend paid, what is Klay's annual total percentage return on this purchase?

c) If the annual returns over a three-year span from Portfolio A are 10%, 5%, and 3%, what is the geometric average return?

d) A stock currently offers an expected return of 3%. If its estimated beta is 2, the market risk premium is 4% and the risk-free rate is 2%. Is this stock over- or under-valued? What would we expect to happen to this stock's price over time?

2) Suppose the following information reflects a portfolio of stocks. Company Amount Invested Return Last Year Beta
Pencil Corp. -$240 -2% 1.2
Eraser Inc. $420 3% 0.7
Marker Tech $320 9% 1.5

a) What is the expected return on this portfolio?
b) What is the portfolio's market risk?
c) Assuming CAPM holds, if the risk-free rate is 4% and the market return 10%, is the portfolio overvalued or undervalued? Briefly explain.
d) Looking at each stock individually, which one would you say had the best risk-adjusted return last year assuming the 4% risk-free rate and 10% market return? Show calculations to support your answer.
Page 2 of 2

a) Klieber Industries has committed to providing its shareholders with a 12% return on equity forever. They just began paying annual dividends. They've committed to paying 10% of their net income as dividends for the next 2 years and then they will pay 70% of their net income as dividends after that forever. Calculate the estimated growth rate for the company in the first two
years and after that?

b) Klieber Industries just paid a dividend of $0.50 and the market discount rate is 9%. What is the market price of a share of Klieber Industries now?

a) You bought call options on a stock and the strike price of the option is $17. The option has 1 week until expiration and the stock is currently priced at $22 per share. You paid $3 per call option and bought 30 total. What is your net profit or loss from this exchange assuming nothing changes between now and when the options expire?

b) Based on the information in a), graph a net payoff diagram for one of the call options you purchased. Be sure to label clearly including the break-even point

Reference no: EM131053495

Is there an advantage to either method of filing

Is there an advantage to either method of filing? If they postpone their wedding until the January date and file as single persons, will they reduce their tax bill for 2004?

Journalize the entries to record the foregoing transactions

Journalize the entries to record the foregoing transactions. Indicate the amount of the interest expense in (a) 2014 and (b) 2015. Determine the carrying amount of the bonds a

Payback period and simple rate of return

Jamieson Enterprises is considering the development of a go-kart track at an estimated total cost of $680,000. The go-karts would have a $50,000 salvage value at the end of

Determining foreign exchange gain

When the receivable was collected on February 15, 2009, the U.S. dollar equivalent was $144,000. In Mills' 2009 consolidated income statement, how much should have been repo

Questions relating to alex retirement savings

The plan provides a six-year graded vesting schedule.  Alex is now in his fifth year working for LANL, and his current year salary is $150,000.  Alex's marginal tax rate is

Problem regarding the national retail chain

On April 3, Kountry Repair Service accepted the seller's counteroffer of $230,000. On September 15, the land was assessed at a value of $185,000 for property tax purposes. O

What are the two special rights

Terminology varies in the way companies differentiate among share types. But many corporations designate shares as common or preferred. What are the two special rights usually

Deductible casualty loss

A fire totally destroyed office equipment and furniture which Monica uses in her business. The equipment had an adjusted basis of $15,000 and a FMV of $10,000 before the fir


Write a Review

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd