A stock produced returns of 16 percent, 9 percent, and 21 percent over three of

Question

A stock produced returns of 16 percent, 9 percent, and 21 percent over three of the past four years. The arithmetic average for the past four years is 10 percent. What is the standard deviation of the stock's returns for the 4-year period?

Select one:

a. 11.75 percent

b. 10.83 percent

c. 9.09 percent

d. 6.82 percent

e. 8.54 percent

AND one MORE

The stock price of Samuelson, Inc., is $71. Investors require a 15 percent rate of return on similar stocks. If the company plans to pay a dividend of $4.20 next year, what growth rate is expected for the company's stock price?

Select one:

a. 9.08 percent

b. 7.56 percent

c. 7.78 percent

d. 6.01 percent

e. 8.24 percent

Explanation / Answer

4 th return =   (10*4) - (16+9+ 21)

                = 40 - 46

               = - 6%

standard devaiation = squarerrot of 103.5

                             = 10.17%

correct option is "B" - 10.83%

2)Current price = D 1 / (Cost of equity -growth)

    71 = 4.20 /( .15 - growth)

   .15 - growth = 4.2/71

growth = .15-.0592

          =.0908 or 9.08%

correct otpion is "A" - 9.08%

year X(return) (X - 10)^2 1 16 36 2 9 1 3 21 121 4 -6 256 Variance 414/4 = 103.5

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