Please help solving the following. 6) You purchased a stock for $51.50 on Decemb
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Please help solving the following. 6) You purchased a stock for $51.50 on December 1, 2016. As of December 1, 2017 you had received dividends of $1.10 per share and the stock closed at $54.20. Wha t is your holding period return both in dollars and as percentage return. a) $ b) % 7) You decide to invest 65% of your funds in a stock fund, 25% in a bond fund, and 10% in a money market fund. The respective annual returns are 14.4%, 5.3% and 1.2%, what is the expected annual return for this portfolio? 8) The risk free rate of return is 1.3% and the expected return for the stock market is 10.2%. What is the expected market return for a stock with a beta of 1.27? (Same formula as required rate of return or market cap rate 9) You are purchasing a $1,000 par value bond with a 6% coupon payable semi-annually. The bond is selling at 115.3 and it has been 97 days since the last interest payment. What will be the invoice price for the bond? (lgnore any broker fees) 10) MNN Company has just signed a long term contract to sell it products to XYZ company that will mean sales and earnings growth of a consistent 8% per year for the next five years. In its just finished fiscal year MNN Company had sales of $1 billion and after tax earnings of $47 million. MNN has a policy of paying 40% of after tax earnings each year in dividends. What total dollar amount of dividends will MNN pay in each of the next five years?Explanation / Answer
6)Holding period return =[P1-P0+D]
= [54.2-51.5+1.1]
3.8
%return = Dollar return /P0
= 3.8/51.5
= .0738 or 7.38%
7)Expected return of portfolio = expected return *% of investment
= [14.4*.65]+[5.3*.25]+[1.2*.10]
= 9.36+1.325+.12
= 10.805 % [rounded to 10.81%]
8)Expected return = Rf+[beta(Rm-Rf)]
= 1.3+[1.27(10.2-1.3)]
= 1.3+ 11.30
= 12.60%
9)Accrued interest on bond =face value *coupon rate * n/365
= 1000*.06*97/365
= 15.95
Purchase price= 1000*115.3/100
= 1153
Invoice price = 1153 +15.95 =$ 1168.95
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