Problem
I. You purchased 500 shares of Brown Stone stock for $41.80 a share. You have received a total of $820 in dividends and $7,280 in proceeds from selling the shares.
i. What is your capital gains (loss) yield on this stock?
ii. What is your total return on this stock?
II.
i. A stock had returns of 12%, 5%, 8%, 17%, and -7% for the past five years. What was arithmetic average annual return for this stock?
ii. Suppose the risk-free rate is 4%. What is the reward for bearing risk (average risk premium) of owning this stock?
iii. What was the standard deviation of the returns for this stock?
iv. Assuming that the returns on the stock follow a normal distribution, what is the range of possible returns, 95% of the time?