Question

The following data on the stock price and dividend payment of ABC. The dividends are paid...

The following data on the stock price and dividend payment of ABC. The dividends are paid out once a year at the end of the year. Below are stock prices prior to payout. Closing price in year t is same as the opening price of the year t + 1. Two investors, Jack and Jill, invested $1000 at the opening prices in 2015. Jack reinvests dividends at the end of every year. Jill stores the cash into her bank paying 0% interest.

year

 closing price dividend paid
2014 360 20
2015 350 20
2016 390 20
2017 320 20
2018 320 20

-calculate value of Jack's portfolio at end of 2017, after the dividend for 2017 has been paid

-calculate value of Jill's portfolio at end of 2017, after the dividend for 2017 has been paid

-are both portfolios worth the same at the end of 2017? why or why not?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Jack
Year Closing price Investment Quantity
2014 360 1000 2.7778
2015 350 20 0.0571
2016 390 20 0.0513
2017 320 20 0.0625
Total 2.9487
Closing prices 320
value of investment 944
Jill
Year Closing price Investment Quantity
2014 360 1000 2.7778
2015 350 0
2016 390 0
2017 320 0
total 2.7778
Closing prices 320
value of investment 889
Dividends received 60
Total portfolio 949
Quantity = Investment/Closing price
$1000 invested at beginning of 2015 (End of year price of 2014)
Dividends calculated for period 2015 to 2017

Both the values are different as dividends are reinvested in Jack's case. Jill has held the same in bank at no interest. Since the equity price has fallen over the period, Jack lost some money compared to Jill.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a. ABC Company has just paid a dividend of $1.00 per share. Dividends are paid annually....
a. ABC Company has just paid a dividend of $1.00 per share. Dividends are paid annually. Analysts estimate that dividends per share will grow at a rate of 20% for the next 2 years, at 15% for the subsequent 3 years, and at 3% thereafter. If the shareholders’ required rate of return is 12% per year, then what is the price of the stock today? What will be the ex-dividend price at the end of the first year? What will...
A stock has had the following year-end prices and dividends: Year Price Dividend 1 $51.50... A...
A stock has had the following year-end prices and dividends: Year Price Dividend 1 $51.50... A stock has had the following year-end prices and dividends: Year Price Dividend 1 $51.50 - 2 59.32 $.65 3 64.13 .70 4 57.86 .77 5 65.19 .86 6 74.86 .95 What are the arithmetic and geometric returns for the stock? Use the arithmetic mean to calculate standard deviation.
Year     Price ($)                      Dividend ($)             &nbsp
Year     Price ($)                      Dividend ($)                          Shares_____   2015      40 ////////////////////////// 1.50//////////////////////////////////////////// bought 200 2016      43 ///////////////////////////2.00 ////////////////////////////////////////// bought 600 2017      52 ///////////////////////////2.50 /////////////////////////////////////////////sold 700 2018      54                                   3.10                            sold 100 Note that all purchases and sales take place at the beginning of the year; that is, the above prices are at the start of the year. On the other hand, all dividends are paid at the end of the year. What is the arithmetic average return?
A stock had the following year-end prices and dividends:    Year Price Dividend 0 $ 59.23...
A stock had the following year-end prices and dividends:    Year Price Dividend 0 $ 59.23 — 1 69.60 $ 1.18 2 62.10 1.41 3 71.08 1.53 What was the arithmetic average return for the stock? 11.53% 8.43% 9.22% 15.06% 14.97%
A stock had the following year-end prices and dividends: Year Price Dividend 0 $ 59.35 —...
A stock had the following year-end prices and dividends: Year Price Dividend 0 $ 59.35 — 1 69.86 $ 1.19 2 62.18 1.43 3 71.30 1.54 What was the arithmetic average return for the stock? 11.63% 9.30% 15.18% 15.27% 8.49%
The following table shows your stock positions at the beginning of the year, the dividends that...
The following table shows your stock positions at the beginning of the year, the dividends that each stock paid during the year, and the stock prices at the end of the year. What is your portfolio percentage return? Company Shares Beginning of Year Price Dividend per Share End of Year Price W 100 $ 25.00 $ 1.00 $ 24.00 P 200 $ 14.00 $ 0.75 $ 15.25 J 400 $ 8.00 $ 10.00 D 200 $ 3.00 $ 0.50 $...
The following table shows your stock positions at the beginning of the year, the dividends that...
The following table shows your stock positions at the beginning of the year, the dividends that each stock paid during the year, and the stock prices at the end of the year. Company Shares Beginning of Year Price Dividend Per Share End of Year Price Johnson Controls 400 $ 73.81 $ 1.35 $ 86.37 Medtronic 300 58.47 0.59 54.41 Direct TV 600 25.84 25.29 Qualcomm 200 43.98 0.48 39.82 What is your portfolio dollar return and percentage return? (Round your...
Year     Price ($)                      Dividend ($) /////////////////////Shares 2015      40 ////////////////
Year     Price ($)                      Dividend ($) /////////////////////Shares 2015      40 /////////////////////////////////// 1.50///////////////////////////// bought 200 2016      43 ////////////////////////////////////2.00 ////////////////////////////bought   600 2017      52 //////////////////////////////////// 2.50 ////////////////////////////sold 700 2018      54                                   3.10 sold 100 Note that all purchases and sales take place at the beginning of the year; that is, the above prices are at the start of the year. On the other hand, all dividends are paid at the end of the year. What is the dollar-weighted return?
A stock has had the following year-end prices and dividends: Year Price Dividend 1 $85.18 ---...
A stock has had the following year-end prices and dividends: Year Price Dividend 1 $85.18 --- 2 $92.35 $0.55 3 $90.49 $0.75 4 $100.05 $0.90 What were percentage rate of returns for Year 2, Year 3, and Year 4? What is the arithmetic average return for the stock? What is the geometric average return for the stock?
You purchased a stock at a price of $51.66. The stock paid a dividend of $2.07...
You purchased a stock at a price of $51.66. The stock paid a dividend of $2.07 per share and the stock price at the end of the year is $57.91. What was the dividend yield?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT