15.12: Problems
- Page ID
- 94743
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1.
You purchase 100 shares of COST (Costco) for $280 per share. Three months later, you sell the stock for $290 per share. You receive a dividend of $0.57 a share. What is your total dollar return?
2.
You purchase 100 shares of COST for $280 per share. Three months later, you sell the stock for $290 per share. You receive a dividend of $0.57 a share. What are your dividend yield, capital gain yield, and total percentage return?
3.
You purchase 100 shares of COST for $280 per share. Three months later, you sell the stock for $290 per share. You receive a dividend of $0.57 a share. What is the EAR of your investment?
4.
You invest in a stock for four years. The returns for the four years are 20%, -10%, 15%, and -5%. Calculate the arithmetic average return and the geometric average return.
5.
You are considering purchasing shares in a company that has a beta of 0.9. The average return for the S&P 500 is 11%, and the average return for US Treasury bills has been 2%. Based on the CAPM, what is your expected return for the stock?
6.
Your portfolio has had a 15% rate of return with a standard deviation of 18% and a beta of 1.1. The average return for the S&P 500 has been 11%, and the average return for US Treasury bills has been 2%. Calculate the Sharpe ratio, Treynor ratio, and Jensen’s alpha for your portfolio.
7.
The monthly returns for Visa (V) and Pfizer (PFE) for 2018–2020 are provided in the chart below. In addition, the monthly return for the SPDR S&P 500 ETF Trust (SPY) is provided; SPY is often used as a proxy for the returns of the S&P 500, or a broad market index. Using Excel, calculate the arithmetic average monthly returns for V, PFE, and SPY. Also, calculate the standard deviation of returns for each of V, PFE, and SPY.
Monthly Returns for SPY, V, and PFE for 2018–2020
| Date | SPY | V | PFE |
|---|---|---|---|
| Jan-18 | 0.0618 | 0.0895 | 0.0226 |
| Feb-18 | -0.0364 | -0.0104 | -0.0197 |
| Mar-18 | -0.0313 | -0.0253 | -0.0135 |
| Apr-18 | 0.0092 | 0.0607 | 0.0316 |
| May-18 | 0.0243 | 0.0303 | -0.0186 |
| Jun-18 | 0.0013 | 0.0149 | 0.0196 |
| Jul-18 | 0.0417 | 0.0324 | 0.1006 |
| Aug-18 | 0.0319 | 0.0742 | 0.0398 |
| Sep-18 | 0.0014 | 0.0233 | 0.0705 |
| Oct-18 | -0.0649 | -0.0816 | -0.0229 |
| Nov-18 | 0.0185 | 0.0280 | 0.0736 |
| Dec-18 | -0.0933 | -0.0673 | -0.0485 |
| Jan-19 | 0.0864 | 0.0233 | -0.0275 |
| Feb-19 | 0.0324 | 0.0971 | 0.0301 |
| Mar-19 | 0.0136 | 0.0563 | -0.0203 |
| Apr-19 | 0.0454 | 0.0528 | -0.0438 |
| May-19 | -0.0638 | -0.0189 | 0.0224 |
| Jun-19 | 0.0644 | 0.0774 | 0.0526 |
| Jul-19 | 0.0201 | 0.0256 | -0.1034 |
| Aug-19 | -0.0167 | 0.0158 | -0.0847 |
| Sep-19 | 0.0148 | -0.0473 | 0.0201 |
| Oct-19 | 0.0268 | 0.0398 | 0.0679 |
| Nov-19 | 0.0362 | 0.0316 | 0.0039 |
| Dec-19 | 0.0240 | 0.0201 | 0.0270 |
| Jan-20 | 0.0045 | 0.0589 | -0.0495 |
| Feb-20 | -0.0792 | -0.0865 | -0.0934 |
| Mar-20 | -0.1300 | -0.1123 | -0.0233 |
| Apr-20 | 0.1336 | 0.1092 | 0.1752 |
| May-20 | 0.0476 | 0.0924 | -0.0044 |
| Jun-20 | 0.0133 | -0.0089 | -0.1352 |
| Jul-20 | 0.0636 | -0.0143 | 0.1768 |
| Aug-20 | 0.0698 | 0.1134 | -0.0083 |
| Sep-20 | -0.0413 | -0.0553 | -0.0288 |
| Oct-20 | -0.0210 | -0.0913 | -0.0332 |
| Nov-20 | 0.1088 | 0.1576 | 0.1381 |
| Dec-20 | 0.0326 | 0.0414 | -0.0293 |
8.
Using the monthly returns provided in the table in problem 7, use Excel to calculate the beta for V and the beta for PFE. Which of these stocks has more systematic risk? What would you expect for the comparative returns of V and PFE?