Y6 Consider a stock priced at $40 that pays an annual dividend of $ 1 per share. An investor purchases the stock on margin, paying $20 per share and borrowing the remainder from the brokerage firm at 10 percent annual interest. a. If, after one year, the stock is sold at a price of $60 per share, what is the return on the stock? b. If investors had used only personal funds rather than borrowing funds, what would have been the stock return?

Y6 Consider a stock priced at $40 that pays an annual dividend of $ 1 per share. An investor purchases the stock on margin, paying $20 per share and borrowing the remainder from the brokerage firm at 10 percent annual interest. a. If, after one year, the stock is sold at a price of $60 per share, what is the return on the stock? b. If investors had used only personal funds rather than borrowing funds, what would have been the stock return?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

You purchase 100 shares of stock for $40 a share. The stock pays a $2 per share dividend at year-end. a. What is the rate of return on your investment if the end-of-year stock price is (i) $38; (ii) $40; (iii) $44? (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers as a whole percent.) Stock Price Rate of Return 38 40 % 44 %
If a security offers a dividend amounting to P 5.23/ share and an investor purchased 200 shares at P 77.50/share, what is his Total Investment Return at the end of the year if the share price increased by 8%? Based on the given above, compute for the Dividend Yield Rate, Capital Gains Rate, and Total Investment Return Rate.
1. Lahhey Publishing wishes to estimate the value of its outstanding preferred stock. The preferred stock has a RM50 par value and pays an annual dividend of RM7.50 per share and currently earning an 8% annual rate of return. A. Calculate the market value of the outstanding preferred stock. B. If an investor purchases the preferred stock at the value calculated in part (a), how much does she gain or lose per share if she sells the stock when the required return on preferred stock has fallen to 6%. Explain.
A share of stock with a beta of 0.78 now sells for $58. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 5%, and the market risk premium is 8%. a. Suppose investors believe the stock will sell for $60 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? b. At what price will the stock reach an "equilibrium" at which it is perceived as fairly priced today? Complete this question by entering your answers in the tabs below. Required A Required B Suppose investors believe the stock will sell for $60 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? Note: Do not round intermediate calculations. Round your opportunity cost of capital calculation as a percentage rounded to 2 decimal places. Opportunity cost of capital The stock is a bad buy and the investors will t invest %
You are interested in buying the preferred stock of a bank that pays a dividend of RM1.80 every quarter. If you discount such cash flows at 8 percent, what is the price of this stock?
An investor buys shares in a mutual fund for $22. At the end of the year the fund distributes a dividend of $0.57, and after the distribution the net asset value of a share is $24.04. What is the investor's percentage return on the investment? Round your answer to two decimal places.
Solve the problem with complete solution. 4. A stock pays an annual dividend of 80 per share. If the stock is trading at 1,500, what is the dividend yield?
d. What would the percentage rate of return be on this common stock investment? Compare this to the rate of return on the warrant computed when the common stock was selling for $55 per share. Note: Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places. Percentage return on stock Percentage return on warrants % %
How much would you pay for a Summerhill common stock that pays a dividend of $1.8? You believe that Summerhill will grow at the rate of 11% for the long term, and you would require a return of 13% from such a stock.a. $ 99.90b. $90.00c. $ 15.37d. $88.27e. $ 14.45
(Preferred stock valuation) Pioneer's preferred stock is selling for $30 in the market and pays a $3.30 annual dividend. Chapter a. If the market's required yield is 9 percent, what is the value of the stock for that investor? b. Should the investor acquire the stock? Chapter a. The value of the stock for that investor is $ per share. (Round to the nearest cent.) b. Should the investor acquire the stock? (Select from the drop-down menus.) Chapter The investor acquire the stock because it is currently V in the market. Chapter 1 should not should I Chapter D Chapter I Chapter Сoprigl Terms of Enter your answer in the answer box. Save for Later ..pptx APR
1. At the beginning of last year you invested 40000 lei in 800 shares of a corporation. At the end of the year the HPR was 10%. You sold the 400 shares and used the amount to buy 1000 shares of stock B. if the expected price is 63.25 lei for stock A and 30.8 lei for stock B? a. What is the expected value of your portfolio at the end of 2022? b. What is the expected return for your portfolio in 2022? c. What is the HPR associated to this investment?
An investor buys shares in a mutual fund for $20. At the end of the year the fund distributes a dividend of $0.67, and after the distribution the net asset value of a share is $24.57. What is the investor's percentage return on the investment? Round your answer to two decimal places. %