1. Calculating Returns
Suppose a stock had an initial price of $84 per share, paid a dividend of $1.40 per share during the year, and had an ending share price of $96. Compute the percentage total return.

The percentage total return is (96-84+1,40)/84=0,1595=15,95%

2. Calculating Yields
In Problem 1, what was the dividend yield? The capital gains yield?

Capital gain yield: (96-84)/84=0,1429=14,29%
Dividend yield: 1,40/84=0,167=1,67%

3. Calculating Returns and Variability
You’ve observed the following returns on Yasmin Corporation’s stock over the past five years: 19 percent, -13 percent, 24 percent, 31 percent, and 8 percent. a. What was the arithmetic average return on Yasmin’s stock over this five-year period? b. What was the variance of Yasmin’s returns over this period? The standard deviation?

A. (19-13+24+31+8)/5=69/5=13,8%
B. Variance=1/(5-1)*((0,138-0,19)^2+(0,138+0,13)^2+(0,138-0,24)^2+(0,138-0,31)^2+(0,138-0,08)^2)=0,02947
Standard deviation: square root of Variance: 0,1717=17,17%

4. Holding Period Return
A stock has had returns of -17.62 percent, 15.38 percent, 10.95 percent, 26.83 percent, and 5.31 percent over the past five years, respectively. What was the holding period return for the stock?

Holding period return= ((1-0,1762) *(1+0,1538) *(1+0,1095)*(1+0,2683)*(1+0,0531))-1=40,85%

5. Risk Premiums
Refer to Table 10.1 in the text on pages 301-303 and look at the period from 1973 through 1978. a. Calculate the arithmetic average returns for large-company stocks and T-bills over this time period. b. Calculate the standard deviation of the returns for large-company stocks and T-bills over this time period. c. Calculate the observed risk premium in each year for the large-company stocks versus the T-bills. What was the arithmetic average risk premium over this period? What was the standard deviation of the