Question

**Chapter 13**

**Financial Planning Exercise 9**

**Calculating approximate yield on mutual fund**

About a year ago, Ramon Navarrete bought some shares in the Saphire Lake Mutual Fund. He bought the fund at $25.80 a share, and it now trades at $26.30. Last year the fund paid dividends of 51 cents a share and had capital gains distributions of $1.03 a share.

- Using the approximate yield formula, what rate of return did
Ramon earn on his investment? Round the answer to two decimal
places.

% - Repeat the calculation using a handheld financial calculator.
Round the answer to two decimal places.

% - Would he have made a 20% rate of return if the stock had risen
to $30 a share?

-Select-YesNo

Answer #1

The price of the Saphire Lake Mutual Fund a year ago = $25.80

The current price of the Saphire Lake Mutual Fund = $26.30

Dividends received = 51 cents = $0.51

Capital gains distribution = $1.03

Total return received from the investment in a year = $0.51 + $1.03 = $1.54

**Option
a:**

Rate of return from the investment using the yield formula = total return received / current stock price

= $1.54 / $26.30 = 0.058555 = 5.86%

**Option
b:**

Rate of return from the investment using financial calculator = total return received / current stock price

= $1.54 / $26.30 = 0.058555 = 5.86%

**Option
c:**

If the stock price raises to $30 then the rate of return would be

= $1.54 / $30 = 0.051333 = 5.13%

So, the answer is NO. It would not give 20% return.

Chapter 13 Financial Planning Exercise 11 Calculating and
evaluating mutual fund returns Here is the per-share performance
record of the Abacus Growth-and-Income fund for 2017 and 2016: 2017
2016 1. Net asset value, beginning of period: $75.73 $70.00 2.
Income from investment operations: 3. Net investment income $ 1.51
$ 1.26 4. Net gains on securities (realized and unrealized) 9.84
11.20 5. Total income from investment operations $11.35 $12.46 6.
Less distributions: 7. Dividends from net investment income ($0.68)
($0.57)...

Chapter 13
Financial Planning Exercise 11
Calculating and evaluating mutual fund returns
Here is the per-share performance record of the Abacus
Growth-and-Income fund for 2017 and 2016:
2017
2016
1. Net asset value, beginning of period:
$54.65
$50.00
2. Income from investment operations:
3. Net investment income
$ 1.04
$ 0.70
4. Net gains on securities (realized and unrealized)
10.38
9.50
5. Total income from investment operations
$11.42
$10.20
6. Less distributions:
7. Dividends from net investment income
($0.47)
($0.32)...

Assume that one year ago, you bought 320 shares of a mutual fund
for $22 per share and that you received an income dividend of $0.17
cents per share and a capital gain distribution of $0.22 cents per
share during the past 12 months. Also assume the market value of
the fund is now $24 a share. Calculate the total return for this
investment if you were to sell it now.
(Do not round intermediate calculations. Round your
answer to...

A year ago, an investor bought 600 shares of a mutual fund at
$8.56 per share. Over the past year, the fund has paid dividends
of $0.89 per share and had a capital gains distribution of $0.65
per share.
a. Find the investor's holding period return, given that this
no-load fund now has a net asset value of $9.11. ( answer in % and
2 decimal places)
b. Find the holding period return, assuming all the dividends
and capital gains...

A year ago, an investor bought 400 shares of a mutual fund at
$8.51 per share. Over the past year, the fund has paid dividends
of $0.83 per share and had a capital gains distribution of $0.69
per share.
a. Find the investor's holding period return, given that this
no-load fund now has a net asset value of $9.28.
b. Find the holding period return, assuming all the dividends
and capital gains distributions are reinvested into additional
shares of the...

Chapter 12
Financial Planning Exercise 7
Calculating key stock performance metrics
The Morton Company recently reported net profits after taxes of
$14.7 million. It has 5 million shares of common stock outstanding
and pays preferred dividends of $1 million a year. The company's
stock currently trades at $67 per share.
Compute the stock's earnings per share (EPS). Round the answer
to two decimal places.
$ per share
What's the stock's P/E ratio? Round the answer to two decimal
places.
$ times
Determine...

Chapter 12
Financial Planning Exercise 2
Calculating key financial ratios
Selected financial information about Backpacking Resources,
Inc., is as follows:
Total assets
$10,000,000
Total liabilities
$3,000,000
Total preferred stock
$500,000
Total annual preferred stock dividends
$35,000
Net profits after tax
$500,000
Number of shares of common stock outstanding
450,000 shares
Current market price of common stock
$63.00 a share
Annual common stock dividends
$4.41 a share
Using the company's financial information, compute the
following:
Dividend yield. Round the answer to...

Chapter 11
Financial Planning Exercise 13
Interpreting stock report information
Using the S&P report in Exhibit 11.6, find
the following information for Apple. If there is no appropriate
data in the report, leave the entry field blank.
What was the amount of revenues (i.e., sales) generated by the
company in 2014?
$ million
What were the latest annual dividends per share and dividend
yield? Round to two decimal places.
$ a share
%
What were the earnings (per share)...

Yield to call
Ten years ago the Templeton Company issued 25-year bonds with a
9% annual coupon rate at their $1,000 par value. The bonds had a 6%
call premium, with 5 years of call protection. Today Templeton
called the bonds.
Compute the realized rate of return for an investor who
purchased the bonds when they were issued and held them until they
were called. Round your answer to two decimal places.
%
Why the investor should or should not...

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