Question 1: One year ago, Mr. Seth Cohen invested $10,400 in 200 shares of First Industries, Inc. stock and just received a dividend of $600.00. Today, he sold the 200 shares as $54.25 per share.
a. What was his capital gain?
b. What was your total return?
c. What was your total dollar return?
d. What was the stock's dividend yield?
Question 2: Two years ago, General Materials and Standard Fixtures' stock prices were the same. Over the first year, General Materials' stock price increased by 10 percent while Standard Fixtures' stock price decreased by 10 percent. Over the second year, General Materials' stock price decreased by 10 percent and Standard Fixtures' stock price increased by 10 percent. Do these two stocks have the same prices today? Explain?
Question 3: The probability that the economy will contract is 0.2. The probably of moderate growth is 0.6, and the probability of a rapid expansion is 0.2. If the economy contracts, you can expect a return on your portfolio of 5 percent. With moderate growth, your return will be 8 percent. If there is a rapid expansion, your portfolio will return 15 percent.
a. What is your expected return?
b. What is the standard deviation of the return?
Question 4: Security F has an expected return of 12 percent and a standard deviation of 9 percent per year. Security G. has an expected return of 18 percent per year.
a. What is the expected return on a portfolio compound of 30 percent of security F and 70 percent of security G.
b. If the correlation between the returns of security F and security G is 0.2. what is the standard deviation of the portfolio described in part (a)
Question 5: There are three securities in the market. The following chart shows their possible payoffs.
Probability Return on Return on Return on
States of Outcome Security 1 (%) Security 2 (%) Security 3 (%)
1 0.1 0.25 0.25 0.10
2 0.4 0.20 0.15 0.15
3 0.4 0.15 0.20 0.20
4 0.1 0.10 0.10 0.25