At year beginning, you observed that the price of stock Apple was $100 and the price of
Fantastic news! We've Found the answer you've been seeking!
Question:
At year beginning, you observed that the price of stock Apple was $100 and the price of Stock Orange was $900. To understand the relation between risk and return, you keep watching on the performance of the stock and the bond over the next three years. The information you observed is as follows:
Stock Apple | Stock Orange | |||
Year | Year-end Price ($) | Dividend ($) | Year-end Price ($) | Dividend ($) |
1 | 115 | 5 | 915 | 20 |
2 | 110 | 1 | 925 | 20 |
3 | 145 | 10 | 930 | 30 |
- What is the stock Apple’s dividend yield in year 2? What is the Stock Orange’s capital gains yield in year 3?
- During the 3-year observation period, what are the average annual total return of Apple and Orange?
- Based on the lessons learned from the capital market history, discuss your interpretation of “higher risk and higher expected return”.
Related Book For
International Finance Theory and Policy
ISBN: 978-0133423648
10th edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
Posted Date: