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tankabanditka [31]
3 years ago
7

On August 15, you purchased 110 shares of stock in the Cara Cotton Company at $26 a share and a year later you sold it for $22 a

share. During the year, you received dividends of $2.00 a share. Compute your HPR and HPY on your investment in Cara Cotton. Use a minus sign to enter negative values, if any. Round your answer for HPR to three decimal places. Round your answer for HPY to one decimal place.
Business
1 answer:
Scrat [10]3 years ago
6 0

Answer:

HPR 7.692 %

HPY 7.7      %

Explanation:

Holding period return: return in one year

Holding period yield: until maturirty

are the same for this case, as the share was for 1 year only:

returns/ investment = HPR = HPY

<u></u>

<u>return: </u>

dividends         $   2

price variance -$   4

 net return      -$   2

<u>Investment</u>

purchase at $   26

-2/ 26 = -1/13 = -0,0769230 = -7.692%

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Answer: $50

Explanation:

We can use the Gordon Growth Model of Stock Valuation. The formula is thus,

P = D1 / r – g

D1 = the annual expected dividend of the next year

r = rate of return

g = the expected dividend growth rate (assumed to be constant)

There is no growth potential and dividends are expected to stay the same so no growth rate and D1 will be the same as D0.

Plugging that into the formula therefore will give us

P = D1/r

P= 4.5/0.09

= $50

Current Stock Price is $50.

6 0
3 years ago
The price of a stock today is $100. next year, the stock price will be either $120 or $90. the risk-free rate is 3% per year. wh
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Inflation can decrease _____, which reduces the amount of goods and services a person can afford
PtichkaEL [24]
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3 years ago
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Biochemical Corp. requires $720,000 in financing over the next three years. The firm can borrow the funds for three years at 10.
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Answer:

Long-term fixed-rate plan-$220,320.00  

Short-term variable-rate plan-$224,280.00  

The long-term fixed-rate plan is less costly as it has a lower interest expense

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