In: Finance
Q1: Suppose you invested $94 in the Ishares High Yield Fund? (HYG) a month ago. It paid a dividend of $0.58 today and then you sold it for $95. What was your dividend yield and capital gains yield on the? investment?
Q2:
The standard deviation of returns of? ________.
I. small stocks is higher than that of large stocks
II. large stocks is lower than that of corporate bonds
III. corporate bonds is higher than that of Treasury bills
Which statement is? true?
Q3: Greg purchased stock in Bear Stearns and Co. at a price of $85 per share one year ago. The company was acquired by JP Morgan at a price of $10 per share. What is? Greg's return on his? investment?
Answer to 1
Calculation of dividend yield:
Formula = cash dividends per share
Market value per share
Dividend = 0.58, stock price = $95
=0.58/95
=0.61%
Calculation of capital gains yield:
Capital gains yield = P1 – P0
P0
Where p0 is initial stock price - $94
P1 is the latest price - $95
Applying in the formula
= 95-94
94
= 1.06%
Answer to 2)
Both I & III.
Small stocks are higher than large stocks and corporate bonds is higher than that of treasury bills.
Answer to 3)
Return on investment:
Profit/ net investment*100
= 85-10
85
=0.8824 or 88.24%.