Reference no: EM132816527

Problem 1

On February 1, you bought 100 shares of a stock for $34 a share and a year later you sold it for $39 a share. During the year, you received a cash dividend of $1.50 a share. Compute your HPR and HPY on this stock investment.

Problem 2

On August 15, you purchased 100 shares of a stock at $65 a share and a year later you sold it for $61 a share. During the year, you received dividends of $3 a share. Compute your HPR and HPY on this investment.

Problem 3

At the beginning of last year, you invested $4,000 in 80 shares of the Chang Corporation. During the year, Chang paid dividends of $5 per share. At the end of the year, you sold the 80 shares for $59 a share. Compute your total HPY on these shares and indicate how much was due to the price change and how much was due to the dividend income.

Problem 4

The rates of return computed in Problems 1, 2, and 3 are nominal rates of return. Assuming that the rate of inflation during the year was 4 percent, compute the real rates of return on these investments. Compute the real rates of return if the rate of inflation were 8 percent.

Problem 9

During the past year, you had a portfolio that contained U.S. government T-bills, long-term government bonds, and common stocks. The rates of return on each of them were as follows:

U.S. government T-bills 5.50%

U.S. government long-term bonds 7.50%

U.S. common stocks 11.60%

During the year, the consumer price index, which measures the rate of inflation, went from 160 to 172 (1982 - 1984 = 100). Compute the rate of inflation during this year.

Compute the real rates of return on each of the investments in your portfolio based on the inflation rate.