Reference no: EM132584965

Problem 1:

Clara Romero bought a share of Tesla, Inc. for $ 299.66 at the beginning of 2018. At the end of the year, Clara will sell the share whose market value was $ 331.29. Determination of the yield obtained by Clara for this investment.

Problem 2:

Joseph Cintron bought 1,000 shares of Waste Management, Inc. for $ 113.74 a share. Waste Management, Inc. paid $ 2.50 in dividends per share. After a year, Mr. Cintrón decided to sell his shares at the market price of $ 112.94 per share. Determine the return on investment made by Mr. Cintrón and the total amount of money he earned or lost in evolution that year.

Problem 3:

The annual returns for five different stocks are presented below. Determine the expected return and risk for a period of five years for each of the shares.

Yields
Year WMT ADRE MSFT GOOG BIIB
20x0 12.0% 7.5% 12.3% 13.1% 8.5%
20x1 9.3% 4.3% 12.0% 16.2% 9.1%
20x2 8.2% 8.1% 11.9% 15.7% 9.0%
20x3 10.3% 9.2% 11.8% 18.2% 8.7%
20x4 11.5% 6.1% 12.0% 19.3% 8.8%

Problem 4:

Calculate the coefficient of variation (CV) for each of the actions in problem 3.

Explain which investment would be preferred by a risk-averse investor (risk-averse investor) and which one would be preferred by a risk-seeking investor (risk-loving investor).

Problem 5:

Using the data provided in problem 3, determining the return and risk for a portfolio made up of the following three shares if you wish to distribute your investment as follows: 20% in ADRE; 65% in MSFT and 15% in GOOG.

How would the portfolio be affected if you distribute your investment as follows: 30% in ADRE; 25% in MSFT and 45% in GOOG?

C. Which of the two portfolios prefers a risk seeking investor investment and why?