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PFIN 3rd Edition by Lawrence Gitman,Michael Joehnk,Randall Billingsley
Edition 3ISBN: 978-1285082578PFIN 3rd Edition by Lawrence Gitman,Michael Joehnk,Randall Billingsley
Edition 3ISBN: 978-1285082578 Exercise 5
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 $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share).
b. Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero).
c. Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).
a. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share).
b. Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero).
c. Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).
Explanation
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The following equation is used for calcu...
PFIN 3rd Edition by Lawrence Gitman,Michael Joehnk,Randall Billingsley
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