In: Finance
Chapter 12
Financial Planning Exercise 1
Ranking investments by expected returns
What makes for a good...
Chapter 12
Financial Planning Exercise 1
Ranking investments by expected returns
What makes for a good investment? Use the approximate yield
formula or a financial calculator to rank the following investments
according to their expected returns. Round the answers to two
decimal places. Do not round intermediate calculations.
- Buy a stock for $45 a share, hold it for 2 years, then sell it
for $80 a share (the stock pays annual dividends of $3 a
share).
%
- Buy a security for $25, hold it for 2 years, then sell it for
$65 (current income on this security is zero). Do not round
intermediate calculations.
%
- Buy a 1-year, 10 percent note for $960 (assume that the note
has a $1,000 par value and that it will be held to maturity). Do
not round intermediate calculations.
%