ADMS 3530 Lecture Notes - Market Risk, Luxury Goods, Risk Premium

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ivorymouse990

8 May 2012

School

York University

Department

Administrative Studies

Course

ADMS 3530

Professor

Lois King

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Document Summary

Solutions: dividend yield = 2/40 = . 05 = 5%. The dividend yield is unaffected; it is based on the initial price, not the final price. Capital gain = = . Capital gains yield = 4/40 = . 10 = 10% Rate of return dividend + capital gain price. 1 = . 0680 = 6. 80: real return = 1 + nominal rate of return. Canada provides the higher real return despite the lower nominal return. Notice that the approximation real rate nominal rate inflation rate would incorrectly suggest that the costaguanan real rate was higher than the canadian real rate. The approximation is valid only for low rates. The average tsx risk premium was 15. 26 %. The average long bond risk premium was 4. 4% for these five years. These results are largely due to the very good performance of the tsx in 2003 to 2007. First, calculate the sample variance, and then take the square root.

Related Questions

Suppose a stock had an initial price of $80 per share, paid a dividend of $0.60 per share during the year, and had an ending share price of $88.

Compute the percentage total return. (Round your answer to 2 decimal places. (e.g., 32.16))

Total return

Suppose a stock had an initial price of $86 per share, paid a dividend of $1.80 per share during the year, and had an ending share price of $94.

What was the dividend yield and the capital gains yield? (Round your answers to 2 decimal places. (e.g., 32.16))

Dividend yield

Capital gains yield

You

grayguinea-pig276

Suppose you bought 550 shares of stock at an initial price of$51 per share. The stock paid a dividend of $0.54 per share duringthe following year, and the share price at the end of the year was$52.

What is the capital gains yield and dividend yield?

amaranthrhinoceros185

Conroy Consulting Corporation (CCC) has been growing at a rate of 14% per year in recent years. This same non-constant growth rate is expected to last for another 2 years (g0,1 = g1,2 = 14%). If D0= $1.70, rs= 9% and gL = 6%, then what is CCC's stock worth today? Round your answer to the nearest cent. Do not round your intermediate computations. $ What is its expected dividend yield at this time? Round the answer to two decimal places. Do not round your intermediate computations. % What is its capital gains yields at this time? Round the answer to two decimal places. Do not round your intermediate computations. % Now assume that CCC's period of supernormal growth is to last another 5 years rather than 2 years (g0,1 = g1,2 = g2,3 = g3,4 = g4,5 = 14%). How would this affect its price, dividend yield, and capital gains yield? I.Due to the longer period of supernormal growth, the value of the stock will be lower for each year. Although the total return will remain the same, the distribution between dividend yield and capital gains yield will differ for the duration of the supernormal growth period. II.Due to the longer period of supernormal growth, the value of the stock will be higher for each year. The total return as well as the distribution between dividend yield and capital gains yield will differ for the duration of the supernormal growth period. III.Due to the longer period of supernormal growth, the value of the stock will be higher for each year. The total return as well as the distribution between dividend yield and capital gains yield will remain the same for the duration of the supernormal growth period. IV.Due to the longer period of supernormal growth, the value of the stock will be lower for each year. The total return as well as the distribution between dividend yield and capital gains yield will differ for the duration of the supernormal growth period. V.Due to the longer period of supernormal growth, the value of the stock will be higher for each year. Although the total return will remain the same, the distribution between dividend yield and capital gains yield will differ for the duration of the supernormal growth period. What will CCC's dividend yield and capital gains yield be once its period of supernormal growth ends? (Hint: These values will be the same regardless of whether you examine the case of 2 or 5 years of supernormal growth, and the calculations are very easy.) Round the answers to two decimal places. Do not round your intermediate computations. Dividend yield % Capital gains yield % Of what interest to investors is the relationship over time between dividend yield and capital gains yield? I.It is of no interest to investors whether they receive dividend income or capital gains income, since both types of income are always taxed at the same rate. II.It is of no interest to investors whether they receive dividend income or capital gains income, since taxes on both types of income must be paid in the current year. III.It is of no interest to investors whether they receive dividend income or capital gains income, since taxes on both types of income can be delayed until the stock is sold. IV.Some investors need cash dividends, while others would prefer growth. Also, investors must pay taxes each year on the dividends received during the year, while taxes on the capital gain can be delayed until the gain is actually realized. V.Some investors need cash dividends, while others would prefer growth. Also, investors must pay taxes each year on the capital gain during the year, while taxes on the dividends can be delayed until the stock is sold.

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ADMS 3530 Lecture Notes - Market Risk, Luxury Goods, Risk Premium

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