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Q1: Suppose you invested $94 in the Ishares High Yield Fund? (HYG) a month ago. It...

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?

Solutions

Expert Solution

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%.

jeff jeffy answered 1 year ago
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