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TCDNNC Group-8 Chapter-10

TCDNNC_GROUP-8_CHAPTER-10

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14 views7 pages

TCDNNC Group-8 Chapter-10

TCDNNC_GROUP-8_CHAPTER-10

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huongcute1608
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We take content rights seriously. If you suspect this is your content, claim it here.
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UEH UNIVERSITY

COLLEGE OF
BUSINESS
FACULTY OF FINANCE

GROUP ASSIGNMENT
SUBJECT: ADVANCED CORPORATE FINANCE

Lecturer: Assoc. Prof. Dr. Trần Thị Hải Lý


Class course: 24C1FIN50510503
Location: B1 - 706
Schedule: Monday Morning
Group: 8
Ho Chi Minh City, October 14th 2024

TASK DELEGATION

Name Code Contribution


Đồng Thành Đức 31221020704 100%
Nguyễn Kim Hương 31221020416 100%
Lê Nguyễn Phương Trúc 31221021630 100%
(Leader)
Nguyễn Thị Tú Uyên 31221024453 100%
Vũ Quang Vinh 31221021637 100%
CHAPTER 10: LESSONS FROM MARKET HISTORY
Question 1. Calculating Returns
Suppose a stock had an initial price of $76 per share, paid a dividend of $1.95 per share during
the year, and had an ending share price of $84. Compute the percentage total return.
!"#$"% '()*+ ,*$-+ . /"$0$)1 '()*+ ,*$-+ 2 3$4$#+"#'
Percentage return =
/"$0$)1 '()*+ ,*$-+
$67 . 89 2 :.<=
= = 13.09%
89

Question 2. Calculating Yields


In Problem 1, what was the dividend yield? The capital gains yield?
3$4$#+"# $:.<=
Dividend yield = = = 2.57%
/"$0$)1 '()*+ ,*$-+ 89
!"#$"% '()*+ ,*$-+ . /"$0$)1 '()*+ ,*$-+ $67 . 89
Capital gains yield = = = 10.53%
/"$0$)1 '()*+ ,*$-+ 89

Question 7. Calculating Returns and Variability


Using the following returns, calculate the arithmetic average returns, the variances, and the
standard deviations for X and Y:

Variable X:
("#$⋯…$"') #*%$ *-%. */%$ #-%$ #0%
Arithmetic average returns = = = 0.084 or 8.4%
) 1
#
Var = ).# [(𝑅1 − 𝑅& )* + (𝑅2 − 𝑅& )* + (𝑅3 − 𝑅& )* + (𝑅4 − 𝑅& )* ] + (𝑅5 − 𝑅& )* ]
#
= 1.# [(12% − 8.4% )* + (24% − 8.4% )* + (−27% − 8.4% )* + (14% − 8.4% )* ] +

(19% − 8.4% )* ]
= 0.04133, or 4.133%
Std = √𝑉𝑎𝑟 = √0.04133 = 0.2033 or 20.33%
Variable Y:
("#$⋯…$"') #-%$ *0%. 22%$ #/%$ 2/%
Arithmetic average returns = )
= 1
= 0.128 or 12.8%
#
Var = ).# [(𝑅1 − 𝑅& )* + (𝑅2 − 𝑅& )* + (𝑅3 − 𝑅& )* + (𝑅4 − 𝑅& )* ] + (𝑅5 − 𝑅& )* ]
#
= 1.# [(14% − 12.8% )* + (29% − 12.8% )* + (−33% − 12.8% )* + (17% −

12.8% )* ] + (37% − 12.8% )* ]


= 0.07412, or 7.412%
Std = √𝑉𝑎𝑟 = √0.07412 = 0.27225 or 27.225%
Question 9. Calculating Returns and Variability
You’ve observed the following returns on SkyNet Data Corporation’s stock over the past five
years: 19 percent, 24 percent, 11 percent, −9 percent, and 13 percent.
a. What was the arithmetic average return on the company’s stock over this 5-year
period?
("#$⋯…$"') #0%$ *-%$##%.0%$ #2%
Arithmetic average returns = = = 0.116 or 11.6%
) 1

b. What was the variance of the company’s returns over this period? The standard
deviation?
#
Var = ).# [(𝑅1 − 𝑅& )* + (𝑅2 − 𝑅& )* + (𝑅3 − 𝑅& )* + (𝑅4 − 𝑅& )* ] + (𝑅5 − 𝑅& )* ]
#
= 1.# [(19% − 11.6% )* + (24% − 11.6% )* + (11% − 11.6% )* + (−9% − 11.6% )* ]

+ (13% − 11.6% )* ]
= 0.01588 or 1.588%
Std = √𝑉𝑎𝑟 = √0.01588 = 0.126 or 12.6%
Question 12. Holding Period Return
A stock has had returns of 12.79, 9.21, 14.68, 21.83, and −10.34 percent over the past 5 years,
respectively. What was the holding period return for the stock?
Holding period return = (1+ R1 ) ´ (1+ R2 ) ´ (1+ R3 ) ´ (1+ R4 ) x (1+R5) −1
= (1+12.79%) x (1+9.21%) x (1+14.68%) x (1+21.83%) x (1-10.34%) - 1
= 0.543 or 54.3%
Question 20. Arithmetic and Geometric Returns
A stock has had returns of 23, 11, 37, −3, 22, and −17 percent over the last six years. What are
the arithmetic and geometric average returns for the stock?
("#$⋯…$"') *2%$ ##%$2/%.2%$ **%.#/%
Arithmetic average returns = )
= 3
= 0.122 or 12.2%

Geometric average returns


!
= 7(1 + R1 )´ (1 + R2 )´ (1 + R3 )´ (1 + R4 )x (1 + R5) 𝑥 (1 + 𝑅6) - 1
!
= 7(1 + 23% )´ (1 + 11% )´ (1 + 37% )´ (1 − 3% )x (1 + 22%) 𝑥 (1 − 17%) - 1
= 0.1067 or 10.67%
Question 21. Arithmetic and Geometric Returns
A stock has had the following year-end prices and dividends:

What are the arithmetic and geometric average returns for the stock?

Year Price Dividend Return

1 64.12

2 68.13 1.15 8.047%

3 61.23 1.25 -8.293%

4 74.27 1.36 23.52%


5 77.38 1.47 6.17%

6 86.19 1.60 13.45%

Percentage return = dividend yield + capital gains yield

!"#$"% '()*+ ,*$-+ . /"$0$)1 '()*+ ,*$-+ 2 3$4$#+"#'


=
/"$0$)1 '()*+ ,*$-+

("#$⋯…$"') 4.6-/%.4.*02%$*2.1*%$3.#/%$ #2.-1%


Arithmetic average returns = = = 0.086 or 8.6%
) 1

Geometric average returns


"
= 7(1 + R1 )´ (1 + R2 )´ (1 + R3 )´ (1 + R4 )x (1 + R5) - 1
"
= 7(1 + 8.047% )´ (1 − 8.293% )´ (1 + 23.52% )´ (1 + 6.17% )x (1 + 13.45%) - 1
= 0.0807 or 8.07%

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