Calculating the return in the given cases
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1. Julio purchased a stock one year ago for $27. The stock is now worth $32, and the total return to Julio for owning the stock was 37 percent. What is the dollar amount of dividends that he received for owning the stock during the year?
2. Babs purchased a piece of real estate last year for $85,000. The real estate is now worth $102,000. If Babs needs to have a total return of 25 percent during the year, then what is the dollar amount of income that she needed to have to reach her objective?
3. The beta of Elsenore, Inc., stock is 1.6, whereas the risk-free rate of return is 8 percent. If the expected return on the market is 1.5 percent, then what is the expected return on Elsenore?
4. The risk-free rate of return is currently 3 percent, whereas the market risk premuium is 6 percent. If the beta of Lenz, Inc., stock is 1.8. then what is the expected return on Lenz?
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Solution Summary
There are four basic problems in finance. Solutions to given problems explain the methodology to find out the dollar return and rate of return in different cases.
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1. Julio purchased a stock one year ago for $27. The stock is now worth $32, and the total return to Julio for owning the stock was 37 percent. What is the dollar amount of dividend that he received for owning the stock during the year?
Capital Gain=$32-$27=$5
Total Return=$27*37%=$9.99
Dividend Return=Total Return-Capital ...
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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