Language: English

# This flashcard is just one of a free flashcard set. See all flashcards!

4
FIN 534 Week 6 Homework Set 3
FIN 534 Week 6 Homework Set 3

Purchase here

http://chosecourses.com/FIN%20534/fin-534-week-6-homework-set-3

Product Description

Directions: Answer the following questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both.
Use the following information for questions 1 through 8:
The Goodman Industries’ and Landry Incorporated’s stock prices and dividends, along with the Market Index, are shown below. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends.

Goodman Industries                                     Landry Incorporated                                                Market Index

Year    Stock Price                Dividend         Stock Price     Dividend              Includes        Dividends

2013    \$25.88                                     \$1.73               \$73.13                           \$4.50                               17.49                 5.97

2012    22.13                                1.59                   78.45                  4.35                      13.17                 8.55

2011    24.75                                1.50                   73.13                  4.13                      13.01                 9.97

2010    16.13                                 1.43                   85.88                  3.75                       9.65                  1.05

2009    17.06                                1.35                   90.00                  3.38                       8.40                   3.42

2008    11.44                                1.28                   83.63                  3.00                       7.05                   8.96

1.1.      Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average annual returns for the two stocks and the index. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and then dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2008 because you do not have 2007 data.)

1.2.      Calculate the standard deviations of the returns for Goodman, Landry, and the Market Index. (Hint: Use the sample standard deviation formula given in the chapter, which corresponds to the STDEV function in Excel.)

1.3.      Estimate Goodman’s and Landry’s betas as the slopes of regression lines with stock return on the vertical axis (y-axis) and market return on the horizontal axis (x-axis). (Hint: Use Excel’s SLOPE function.) Are these betas consistent with your graph?

1.4.      The risk-free rate on long-term Treasury bonds is 6.04%. Assume that the market risk premium is 5%. What is the required return on the market using the SML equation?

1.5.      If you formed a portfolio that consisted of 50% Goodman stock and 50% Landry stock, what would be its beta and its required return?

1.6.      What dividends do you expect for Goodman Industries stock over the next 3 years if you expect you expect the dividend to grow at the rate of 5% per year for the next 3 years? In other words, calculate D1, D2, and D3. Note that D0 = \$1.50.

1.7.      Assume that Goodman Industries’ stock, currently trading at \$27.05, has a required return of 13%. You will use this required return rate to discount dividends. Find the present value of the dividend stream; that is, calculate the PV of D1, D2, and D3, and then sum these PVs.

1.8.      If you plan to buy the stock, hold it for 3 years, and then sell it for \$27.05, what is the most you should pay for it?

Use the following information for Question 9:
Suppose now that the Goodman Industries (1) trades at a current stock price of \$30 with a (2) strike price of \$35. Given the following additional information: (3) time to expiration is 4 months, (4) annualized risk-free rate is 5%, and (5) variance of stock return is 0.25.

9. What is the price for a call option using the Black-Scholes Model?

Tags: 4, All Individual and Learning Team Assignments, All Weeks, Ashford, Assignment 1, Assignment 2, Assignment 3, Assignment 4, Assignment 5, Axia College, Checkpoint, FIN 534 week 1 DQ, FIN 534 week 2 DQ, FIN 534 week 3DQ, FIN 534 week 4 DQ, FIN 534 week 5DQ, FIN 534 week 6 DQ, FIN 534 final Project, FIN 534 week 1 Assignment, FIN 534 week 2 DQ, FIN 534 week 5DQ, FIN 534 A Graded, FIN 534 A++ Work, FIN 534 All discussion Questions, FIN 534 All Individual and Learning Team Assignments, FIN 534 All Weeks, FIN 534 Answered, FIN 534 Assignment, FIN 534 Axia College, FIN 534 Checkpoint, FIN 534 Complete Assignments, FIN 534 Complete Course, FIN 534 DQs, FIN 534 Entire Class, FIN 534 Final Exam, FIN 534 Final Guide, FIN 534 Full Course, FIN 534 help, FIN 534 Homework, FIN 534 Individual Assignment, FIN 534 Learning team Assignment, FIN 534 Material, FIN 534 online class, FIN 534 Phoenix, FIN 534 Product, FIN 534 Questions, FIN 534 Solution, FIN 534 Staryer, FIN 534 Study Guide, FIN 534 Summary, FIN 534 Syllabus, FIN 534 tutorial, FIN 534 University of Phoenix Learning Team Assignment, FIN 534 UOP, FIN 534 UOPhelp, FIN 534 Version, FIN 534 Week, FIN 534 Week 1, FIN 534 Week 1-5, FIN 534 Week 1-6, FIN 534 Week 2, FIN 534 week 2 Assignment, FIN 534 Week 3, FIN 534 week 3Assignment, FIN 534 Week 4, FIN 534 week 4 Assignment, FIN 534 Week 5, FIN 534 week 5 Assignment, FIN 534 week 6 Assignment, FIN 534 Whole Class FIN 534 Entire Solution, FIN 534 Whole Tutorial, FIN 534 Work, Full Course, Latest, New, online class, Syllabus, University of Phoenix Learning Team Assignment, UOP week 1 DQ, UOP week 2 DQ, UOP week 3DQ, UOP week 4 DQ, UOP week 5, UOP week 5DQ, UOP week 6 DQ, Updated, Version, Week 1-5, Week 1-6, Whole Class Entire Solution
Source:
Flashcard info:
Author: CoboCards-User
Main topic: FIN 534
Topic: FIN 534
Published: 12.12.2015