Question

1. Calculate the rates of return (holding period returns) for the following stocks:

Stock | Beginning price: P_{0} |
Ending price: P_{1} |
Dividend payment: D_{1} |

A | 21.38 | 16.06 | 2.6 |

B | 108.74 | 118.92 | 5.25 |

C | 4.25 | 5.58 | 0.19 |

Part 1

What was the rate of return for stock A?

Part 2

What was the rate of return for stock B?

Part 3

What was the rate of return for stock C?

2. You bought Samsung stock for $45 on April 1. The stock paid a dividend of $3 on July 1, and had a price of $53. It is now Oct. 1, and the stock price is $60.

Part 1

What was the arithmetic average quarterly return?

Part 2

What was the geometric average return per quarter?

3. You've recorded the following prices and dividend payments for a stock:

Month | Stock price | Dividend |

1 | 43.28 | |

2 | 43.44 | 0.65 |

3 | 41.86 | |

4 | 44.15 | |

5 | 44.34 | 0.65 |

Part 1

What was the return in month 5?

Part 2

What was the arithmetic average monthly return?

Part 3

What was the geometric average return per month

Answer #1

**Answer to Question
1:**

**Part 1.**

Rate of Return = (Dividend Received + Ending Price – Beginning
Price) / Beginning Price * 100

Rate of Return = ($2.60 + $16.06 - $21.38) / $21.38 * 100

Rate of Return = -$2.72 / $21.38 * 100

**Rate of Return = -12.72%**

**Part 2.**

Rate of Return = (Dividend Received + Ending Price – Beginning
Price) / Beginning Price * 100

Rate of Return = ($5.25 + $118.92 - $108.74) / $108.74 * 100

Rate of Return = $15.43 / $108.74 * 100

**Rate of Return = 14.19%**

**Part 3.**

Rate of Return = (Dividend Received + Ending Price – Beginning
Price) / Beginning Price * 100

Rate of Return = ($0.19 + $5.58 - $4.25) / $4.25 * 100

Rate of Return = $1.52 / $4.25 * 100

**Rate of Return = 35.76%**

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?

1. The following table shows rates of return for two stocks.
A
B
C
1
Year
Stock A
Stock B
2
1
14%
13%
3
2
-15%
-14%
4
3
-6%
-9%
5
4
5%
28%
6
5
14%
8%
7
6
15%
7%
a. What is the arithmetic average return for stock B?
b. What is the variance for stock B?
c. What is the covariance of returns?
2. The following table shows realized rates of return for two...

Consider the following five monthly returns. The arithmetic
average monthly return over this period is 1.40% and the geometric
average monthly return over this period is 1.33%. Explain the
difference between the arithmetic average return and the geometric
average return. Are both numbers useful? If so, explain why?
3% -1% 2% 7% -4%
Choose the correct answer below.
Both numbers are useful. The geometric average return tells you
what you would actually make if you held the stock over this...

A stock has had the following year-end prices and dividends:
Year Price Dividend
0 $ 43.29 -
1 48.27 $ .48
2 57.19 .51
3 45.27 .60
4 52.19 .65
5 61.27 .73
What are the arithmetic and geometric average returns for the
stock? (Do not round intermediate calculations. Enter your answers
as a percent rounded to 2 decimal places, e.g., 32.16.)
Arithmetic average return ? %
Geometric average return ?%

You've collected the following historical rates of return for
stocks A and B:
Year (t)
rA,t
rB,t
2016
0.02
0.02
2015
0.08
0.05
2014
0.19
0.07
1. What was the average annual return for stock A
2. What was the average annual return for stock B?
3. What was the standard deviation of returns for stock A?
4.What was the standard deviation of returns for stock B?

XYZ's stock price and dividend history are as follows:
Year
Beginning-of-Year Price
Dividend Paid at Year-End
2016
$
200
$
6
2017
220
6
2018
185
6
2019
200
6
An investor buys three shares of XYZ at the beginning of 2016,
buys another two shares at the beginning of 2017, sells one share
at the beginning of 2018, and sells all four remaining shares at
the beginning of 2019.
a. What are the arithmetic and geometric
average time-weighted rates...

XYZ's stock price and dividend history are as follows:
Year
Beginning-of-Year Price
Dividend Paid at Year-End
2017
$
180
$
4
2018
200
4
2019
170
4
2020
180
4
An investor buys three shares of XYZ at the beginning of 2017,
buys another two shares at the beginning of 2018, sells one share
at the beginning of 2019, and sells all four remaining shares at
the beginning of 2020.
a. What are the arithmetic and geometric
average time-weighted rates...

Use the following data for the next 2 questions: You purchased a
stock on 1/1/20X1 for $100. The following table gives the price of
the stock and the dividend paid for several years. Date Price
Dividend 1/1/20X2 110 2 1/1/20X3 105 3 1/1/20X4 130 4 11.
Date
Price
Dividend
1/1/20X2
110
2
1/1/20X3
105
3
1/1/20X4
130
4
What is the arithmetic average annual return over the three-year
period for the stock?
What is the geometric average annual return over...

1. Using the data in the table to the right,
calculate the return for investing in the stock from January 1 to
December 31. Prices are after the dividend has been paid.
Date Price Dividend
1/2/03 $32.24 -
2/5/03 $30.91 $0.19
5/14/03 $30.98 $0.18
8/13/03 $32.83 $0.17
11/12/03 $39.42 $0.18
1/2/04 $40.14 -
What is the return for the entire period? (round to two decimal
places)
2. Ten annual returns are listed in the
following table:
−19.6%
16.8%
18.2%
−49.6%...

XYZ stock price and dividend history are as follows:
Year Beginning-of-Year Price Dividend Paid at Year-End
2010 $120 $3
2011 $145 $3
2012 $115 $3
2013 $120 $3
An investor buys six shares of XYZ at the beginning of 2010,
buys another two shares at the beginning of 2011, sells one share
at the beginning of 2012, and sells all seven remaining shares at
the beginning of 2013.
a. What are the arithmetic and geometric average time-weighted
rates of return...

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