A Canada - based investor buys shares of Toronto - Dominion Bank (Toronto: TD.TO) for C $

Question:

A Canada - based investor buys shares of Toronto - Dominion Bank (Toronto: TD.TO) for C $ 72.08 on 15 October 2007, with the intent of holding them for a year. The dividend rate is C $ 2.11 per year. The investor actually sells the shares on 5 November 2007, for C $ 69.52. The investor notes the following additional facts: No dividends were paid between 15 October and 5 November.
The required return on TD.TO equity was 8.7 percent on an annual basis and 0.161 percent on a weekly basis.
A. State the lengths of the expected and actual holding periods.
B. Given that TD.TO was fairly priced, calculate the price appreciation return (capital gains yield) anticipated by the investor given his initial expectations and initial expected holding period.
C. Calculate the investor’s realized return.
D. Calculate the realized alpha.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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