Suppose that you bought one share of Apple on January 5, 2021. Then one month after that (Feb 5^th) you got a dividend of $0.205 per share. Then you got 3 more dividends of $0.22 per share. One on May 5^th, Aug 5^th, and Nov 5^th. For simplicity purposes, assume that months have 30 days and that the length of the periods is the same.

You sold the stock exactly one year after you bought it. The day before you sold the stock you did some calculations to see if you could predict the price of the stock.

Your expected yearly return is 16%

To get you the purchase price and your sales price got to Yahoo Finance. In the lookup bar in the site write APPL (Apple’s ticker symbol) and once the info for Apple is displayed, Click on Historical Data, which will display historical prices for Apple’s Stock:

Once the data is displayed, make sure to determine the time period you want to analyze.

1. Calculate your predicted or theoretical price. In order to do so, and since dividend payments are not the same, create a timeline with the appropriate cash flows and then calculate the value.
2. How different were the values between your theoretical calculation in (1.) and the real sales price(% difference)
3. What would have been your theoretical return (P2-P1/P1)
4. What is your true return? (P2-P1/P1)
5. Do you think that this is a good way to predict stock prices?

Answer rating: 100% (QA)

Here are the steps to solve this problem 1 Purchase price P1 on Jan 5 2021 14219 from APPL histor... View the full answer