Security Analysis

homework help

two part

Show your work. Write legibly. Problem 2: (20 points) 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 (three weeks later), 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% on an annual basis and 0.161% on a weekly basis. a) State the lengths of the expected and actual holding periods. Expected holding period = Actual holding period = 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 actual or realized return (over the holding period of 3 weeks). 4 d) Calculate the investor's expected return (over the holding period of 3 weeks). e) Calculate the realized alpha (over the holding period of 3 weeks)