You purchased a share of stock for $20. One year later, you received $1 as a dividend
Question:
You purchased a share of stock for $20. One year later, you received $1 as a dividend and sold the share for $29. What was your holding-period return?
2. You have been given this probability distribution for the holding-period return for KMP stock:
Stock of the Economy Probability HPR
Boom 0.30 18%
Normal growth 0.50 12%
Recession 0.20 -5%
What is the expected holding-period return for KMP stock? What is the expected standard deviation?
3. If a portfolio had a return of 18%, the risk-free asset return was 5%, and the standard deviation of the portfolio's excess returns was 34%, the risk premium would be?
4. Over the past year, you earned a nominal rate of interest of 8% on your money. The inflation rate was 3.5% over the same period. The exact actual growth rate of your purchasing power was?
5. Use the below information to answer the following question.
Investment Expected Return E(r) Standard Deviation
1 0.12 0.3
2 0.15 0.5
3 0.21 0.16
4 0.24 0.21
U = E(r) - (A/2)s2, where A = 4.0.
Based on the utility function above, which investment would you select? Additionally, What does A represent in the equation?
Expert Answer:
1 To calculate the holdingperiod return you first need to determine the total return which includes both the dividend received and the capital gain fr... View the full answer
