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PFIN 2nd Edition by Lawrence Gitman ,Michael Joehnk,Randall Billingsley
Edition 2ISBN: 978-1111821999PFIN 2nd Edition by Lawrence Gitman ,Michael Joehnk,Randall Billingsley
Edition 2ISBN: 978-1111821999 Exercise 1
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.
a. Buy a stock for $35 a share, hold it for 3 years, and then sell it for $75 a share (the stock pays annual dividends of $2 a share).
b. Buy a security for $15, hold it for 2 years, and then sell it for $55 (current income on this security is zero).
c. Buy a 1-year, 5% note for $925 (assume that the note has a $1,000 par value and that it will be held to maturity).
a. Buy a stock for $35 a share, hold it for 3 years, and then sell it for $75 a share (the stock pays annual dividends of $2 a share).
b. Buy a security for $15, hold it for 2 years, and then sell it for $55 (current income on this security is zero).
c. Buy a 1-year, 5% note for $925 (assume that the note has a $1,000 par value and that it will be held to maturity).
Explanation
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The yield on investment is the rate at w...
PFIN 2nd Edition by Lawrence Gitman ,Michael Joehnk,Randall Billingsley
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