4. Complete the example for calculating realized returns with cash from our meeting. Use both portfolio...

 

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4. Complete the example for calculating realized returns with cash from our meeting. Use both portfolio method and accounting method to verify that they produce the same results. Suppose you have $100,000 and ABC is trading at $20/share. One-year later, ABC pays $2 in dividends and is worth $16/share. a) Suppose you bought 5,000 shares of ABC. b) Suppose you bought 2,500 shares of ABC, and deposit rate is 5%. c) Supposey you bought 10,000 shares of ABC and borrowed at 5%. d) How would the method be affected if the borrowing rate was higher at 6%, but the deposit rate remains unchanged? 4. Complete the example for calculating realized returns with cash from our meeting. Use both portfolio method and accounting method to verify that they produce the same results. Suppose you have $100,000 and ABC is trading at $20/share. One-year later, ABC pays $2 in dividends and is worth $16/share. a) Suppose you bought 5,000 shares of ABC. b) Suppose you bought 2,500 shares of ABC, and deposit rate is 5%. c) Supposey you bought 10,000 shares of ABC and borrowed at 5%. d) How would the method be affected if the borrowing rate was higher at 6%, but the deposit rate remains unchanged?

Answer rating: 100% (QA)

a Portfolio Method 1 Initial Investment Number of shares bought 5000 Cost per share 20 Total initial investment 5000 shares 20share 100000 2 Dividends ... View the full answer