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Basic concepts in Finance

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Karen purchased a stock for $40 last year. She found out today that she had a -75% return on her investment. Which of the following must be true?

A. The stock is worth $10 today.
B. The stock is worth $30 today.
C. The stock paid no dividends during the year.
D. Both A and C must be true.

You invested $15,000 in a portfolio with an expected return of 10 percent and $10,000 in a portfolio with an expected return of 16 percent. What is the expected return of the combined portfolio?

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Solution Summary

There are two problems. Solution to first problem depicts the steps to estimate the current price of a stock. Solution to second problem describes the steps to estimate the expected return of the combined portfolio in the given case.

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Karen purchased a stock for $40 last year. She found out today that she had a -75% return on her investment. Which of the following must be true?

Current Price=$40*(1-75%)=$10

This is possible only when no dividend is paid, as ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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