If the index value when you invested first in the equity market seven years back is...

If the index value when you invested first in the equity market seven years back is 32,000 and the current index levels are at 40,000, what is the holding period re- turn? What is the geometric average annual return that you would communicate to your friend on your investment?

Solutions

Expert Solution

Initial Index Value, I0 = 32,000

Number of years, n = 7

Final Index value, I1 = 40,000

Holding period return = (I1 - I0)/ I0 = (40,000 - 32,000)/32,000 = 25%

Geometric Average Annual Return = ( I1/I0)^1/n -1 = [ (40,000/32,000)^1/7] -1

= 3.239% = 3.24%

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

If the index value when you invested first in the equity market seven years back is...

Problem 4-21 Future Value a. What is the future value in seven years of $1,500 invested...

Problem 4-21 Future Value a. What is the future value in seven years of $1,500 invested in an account with an APR of 8 percent, compounded annually? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the future value in seven years of $1,500 invested in an account with an APR of 8 percent, compounded semiannually? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)...

You invested money in a savings account paying 10% interest seven years ago.

You invested money in a savings account paying 10% interest seven years ago. The account is now worth $5,527.50. How much did you invest?

A U.S. investor is considering a portfolio consisting of 60% invested in the U.S. equity index...

A U.S. investor is considering a portfolio consisting of 60% invested in the U.S. equity index fund and 40% invested in the British equity index fund. The expected returns for the funds are 10% for the U.S. and 8% for the British, standard deviations of 20% for the U.S. and 18% for the British, and a correlation coefficient of 0.15 between the U.S. and British equity funds. What is the standard deviation of the proposed portfolio?

In 5 years you will get $310. What is the present value if it is invested...

In 5 years you will get $310. What is the present value if it is invested at 10% 15% You have $450 today. How much will you get if you invest is for 7 years at 10% 15% You want $590 each year for the next 20 years. How much do you need to invest today a 10% 15% What is the NPV of a $200 investment that returns $40 per year for 7 years AND do you accept this...

You are analyzing the U.S. equity market based upon the S&P Industrials Index and using the...

You are analyzing the U.S. equity market based upon the S&P Industrials Index and using the present value of free cash flow to equity technique. Your inputs are as follows: Beginning FCFE: $80 k = 0.07 Growth Rate: Year 1–3: 7% 4–6: 6% 7 and beyond 5% Assuming that the current value for the S&P Industrials Index is 4,200, would you underweight, overweight, or market weight the U.S. equity market? Do not round intermediate calculations. Round your answer to the...

You are analyzing the U.S. equity market based upon the S&P Industrials Index and using the...

You are analyzing the U.S. equity market based upon the S&P Industrials Index and using the present value of free cash flow to equity technique. Your inputs are as follows: Beginning FCFE: $90 k = 0.09 Growth Rate: Year 1–3: 9% 4–6: 8% 7 and beyond 7% Assuming that the current value for the S&P Industrials Index is 5,500, would you underweight, overweight, or market weight the U.S. equity market? Do not round intermediate calculations. Round your answer to the...

You are analyzing the U.S. equity market based upon the S&P Industrials Index and using the...

You are analyzing the U.S. equity market based upon the S&P Industrials Index and using the present value of free cash flow to equity technique. Your inputs are as follows: Beginning FCFE: $60 k = 0.09 Growth Rate: Year 1–3: 9% 4–6: 7% 7 and beyond 5% Assuming that the current value for the S&P Industrials Index is 2,000, would you underweight, overweight, or market weight the U.S. equity market? Do not round intermediate calculations. Round your answer to the...

best practice of using market value of invested capital

A company has a market value of equity of $465,710, and a market value of debt...

A company has a market value of equity of $465,710, and a market value of debt of $391,540. The company's levered cash flow (i.e. cash flow after paying all interest) is $75,795 and is distributed annually as dividends in full. The interest rate on the debt is 9.22%. You own $59,230 worth of the market value of the company's equity. Assume that the cash flow is constant in perpetuity, there are no taxes, and you can borrow at the same...

Subjects