(Calculating rates of return) The S&P stock index represents a portfolio comprised of 500 large...
Question:
(Calculating rates of return) The S&P stock index represents a portfolio comprised of 500 large publicly traded companies. On December 24, 2007, the index had a value of 1,410 and on December 24, 2008, the index was approximately 925.
If the average dividend paid on the stocks in the index is approximately 4.5 percent of the value of the index at the beginning of the year, what is the rate of return earned on the S&P index?
What is your assessment of the relative riskiness of investing in a single stock such as Google compared to investing in the S&P index?
A) The rate of return earned on the S&P 500 is ? (Round to two decimal places.)
B) What is your assessment of the relative riskiness of investing in a single stock, such as Google, compared to investing in the S&P index? (Select the best choice below.)
A. In general, investing in the S&P index is riskier than investing in a single stock.
B. In general, investing in a single stock is riskier than investing in the S&P index.
C. There is not enough information given to answer this question.
D. In general, investing in a single stock has the same relative riskiness as investing in the S&P index.
Return on stock index:
The return on a stock index is composed of returns on constituent stocks and the dividends paid out. The returns may be capital gain/loss adjusted for total dividend yield on the index.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerA)
Total return=(End index value-Beginning index value+Dividends paid)/Beginning index value
End index value=925
Beginning index value=1410
Divide...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Holding Period Return (HPR): Formula & Examples
from
Chapter 6 / Lesson 11
120K
Learn what the holding period return (HPR) of an investment is and how to calculate it using the holding period return formula. Also, learn how to calculate the annualized HPR and the holding period return for periodic payments.
Related to this Question
- The S&P stock index represents a portfolio comprised of 500 large publicly traded companies. On December 24, 2007, the index had a value of 1,410 and on December 24, 2008, the index was approximately
- The S&P/ASX 200 share price index represents a portfolio which comprises the 200 largest companies listed on the Australian Securities Exchange. On December 12, 2007, the index had a value of 6615.2 and on December 12, 2008 the index had a value of 3510.
- The S&P 500 Index is one of the most commonly used benchmark indices for the U.S. equity markets. Consisting of 500 companies, it is a market value-weighted index. This means that each company's performance is reflected in the index, weighted by the ratio
- Consider a value-weighted market index that includes the following two companies: 1) What is the total value of the two companies' shares on day 1? 2) What is the total value of the two companies' sha
- Consider a value-weighted market index that includes the following two companies: You form a portfolio to mimic the index. On Day 1, the portfolio has weights which are equal to the value of each comp
- An index consists of the following securities. What is the value-weighted index return (assume today's index is 100)? | Stock | Shares Outstanding | Beginning Share Price | Ending Share Price | T | 5
- An index consists of the following securities. What is the value-weighted index return? | Value-Weighted | Shares Outstanding | Beginning Share Price | Ending Share Price | C | 3,000 | $18 | $26 |
- The S&P 500 Index is one of the most commonly used benchmark indices for the U.S. equity markets. Consisting of 500 companies, it is a market value-weighted index. This means that each company's perfo
- On September 12, a stock index futures contract was at 423.70. The December 400 call was at 26.25, and the put was at 3.25. The index was at 420.55. The futures and options expire on December 21. The
- Consider a value-weighted market index that includes the following two companies. Answer the following questions. A. What is the total value of the two companies' shares in day 1? B. What is the tota
- A stock sells for $6.99 on December 31, providing the seller with a 6% annual return. What was the price of the stock at the beginning of the year?
- A stock sells for $6.99 on December 31, providing the seller with a 6% annual return. What was the price of the stock at the beginning of the year? a. $5.84 b. $6.59 c. $7.42 d. $1.16
- On January 1, 2008, Mr. Dow bought 100 shares of stock at $12 per share. On December 31, 2010, he sold the stock for $18 per share. What is his annual rate of return? Interpolate to find the answer.
- A type of index that weighs each company by its total market value as a percentage of the total market value for all firms is a) equal weighted index b) value weighted index c) an equally weighted
- A mutual fund invests in Large-capitalization stocks. Its performance is most appropriately measured again which of the following? A. S&P 500 index B. Wilshire 5000 index C. Value Line Index
- A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $13, $20, and $60. The number of outstanding shares for each is 500,000 shares, 500,000 shares, a
- Which of the following indexes includes the largest number of actively traded stocks? a) the Nasdaq Composite Index b) the NYSE Composite Index c) the Wilshire 5000 Index d) the Value Line Composite Index.
- On December 31, 20x6, the market value of Rapid Tech Company's portfolio of long-term available-for-sale securities was $640,000. The cost of these securities was $570,000. Prepare the entry to adjus
- When monitoring the value of your stock investments, it is important to: A. Wait until you sell them to determine their value. B. Track the prices in the December copy of a financial magazine. C. Estimate their values based on similar stocks. D. Determine
- If the company is listed in multiple stock exchanges, how their overall market capitalization and total number of shares can be calculated to show the performance?
- A benchmark index has three stocks priced at $20, $38, and $45. The number of outstanding shares for each is 350,000 shares, 400,000 shares, and 550,000 shares, respectively. If the market value weighted index was 120 yesterday and the prices changed to $
- What is a value-weighted index of stock prices of 500 large U.S. firms?
- The what is a value-weighted index of stock prices of 500 large U.S. firms?
- A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $12, $20, and $60. The number of outstanding shares for each is 600,000 shares, 500,000 shares, and 200,000 shares, respectively. If the stock prices ch
- A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $10, $18, and $40. The number of outstanding shares for each is 610,000 shares, 510,000 shares, and 210,000 shares, respectively. If the stock prices ch
- based on the the following stock prices and shares outstanding information for xyz company compute the beginning and ending values for a price weighted index and a market value weighted index . Stocks
- The S&P 500 index stands at 1500 today and the 3-month futures price is 1450. The expected dividends are 1450. Can you make an arbitrage profit? If so how? Describe the trade in detail.
- Consider a stock index currently standing at 250. The dividend yield on the index is 4% per annum and the risk-free rate is 6% per annum. A three-month European call option on the index with a strike price of 245 is currently worth $10. What is the value
- What was the MVA for 2016? Assume that it's a stock price on December 31, 2016, was $2.5. Evaluate managers' performance based on MVA. Balance sheets as of December 31 Millions of Dollars) 2016 201
- The prices of Stocks A, B, and C are $40, $20, and $30 respectively. A price-weighted index is comprised of these stocks only and its divisor is currently 3. Stock A has just announced a four-for-one
- The S&R index spot price is 1100, the risk-free rate is 5%, and the continuous dividend yield on the index is 2%. a. Suppose you observe a 6-month forward price of 1120. What arbitrage would you undertake? b. Suppose you observe a 6-month forward price
- Three stocks have share prices of $23, $80, and $50 with total market values of $470 million, $420 million, and $220 million, respectively. If you were to construct a price-weighted index of the three stocks, what would be the index value? A) 370 B) 51 C
- Suppose the spot price of the S&P500 stock index is 2238. The risk free rate is .0085 and the dividend yield on the S&P500 is .0165. The October futures price on the index (T = .4932) is 2225 today. 1. State the positions you would take arbitrage and show
- Consider a stock index currently standing at 2,100. The dividend yield on the index is 3% per annum and the risk-free rate is 1%. A 3-month European call option on the index with a strike price of 2,0
- A portfolio of small-company common stocks is best described as the stocks of the firms which: a) are included in the Samp;P 500 index. b) represent the smallest twenty percent of the companies list
- A business can be valued by capitalizing its earnings stream. How might you use the same idea to value securities, especially the stock of large publicly held companies? Is there a way to calculate a
- Suppose you are a market-maker in S&R index forward contracts. The S&R index spot price is 1100, the risk-free rate is 5%, and the dividend yield on the index is 0. a. What is the no-arbitrage forward
- A benchmark index has three stocks priced at $23, $43, and $56. The number of outstanding shares for each 350,000 shares, 405,000 shares, and 553,000 shares, respectively. Is the market value weighted
- A benchmark index has three stocks priced at $25, $48, and $58. The number of outstanding shares for each is 360,000 shares, 425,000 shares, and 573,000 shares, respectively. If the market value-weig
- A benchmark index has three stocks priced at $34, $57, and $67. The number of outstanding shares for each is 405,000 shares, 515,000 shares, and 663,000 shares, respectively. If the market value weigh
- You are given the following information concerning two stocks that make up an index. Assume that the divisor is 2. What is the percentage return for the price-weighted index? Shares Outstanding Beginning of Year Price End of year Price Kirk, Inc. 45,000
- A trader has a portfolio worth $5 million that mirrors the performance of a stock index. The stock index is currently 1,250. Futures contracts trade on the index with one contract being on 250 times t
- A business can be valued by capitalizing its earnings stream. a. How might you use the same idea to value securities, especially the stock of large publicly held companies? b. Is there a way to calculate a value that could be compared to the stock?s mar
- For a portfolio of illiquid assets, hedge fund managers often have considerable discretion in portfolio valuation at the end of each month and may have incentives to smooth returns by marking values below actual in high-return months and above actual in l
- Consider a stock index currently standing at 250. The dividend yield on the index is 4% per year, and the risk-free rate is 6% per year. A 3-month European call option on the index with a strike price
- A price-weighted index consists of stocks A, B, and C which are priced at $27, $11, and $18 a share, respectively. The current index divisor is 2.24. If stock B undergoes a 1-for-3 reverse stock split
- A public company has a book value of $128 million. They have 20 million shares outstanding, with a market price of $4 per share. Which of the following statements is true regarding this company? A) Investors may consider this firm to be a growth company.
- You are the manager of a stock portfolio. On October 1, your holdings consist of the eight stocks listed in the following table, which you intend to sell on December 31. You are concerned about a market decline over the next three months. The number of sh
- We are given the information that Microthin's stock price was $21 in December 2012, $29 in December 2013, $27 in December 2014, $20 in December 2015, and $26 in December 2016. It also pays annual divi
- On August 1, a portfolio manager has a bond portfolio worth $10 million. The duration of the portfolio in October will be 7.1 years. The December Treasury bond futures price is currently 91-12 and the
- Investing in an index fund is argued as active stock picking may go wrong. Are those who maintain the leading stock market indices better in picking the companies that make the index than the managers
- Determine the value of a three-month at-the-money European call option on a stock index when the index is at 250, the risk-free interest rate is 10% per annum, the volatility of the index is 18% per annum, and the dividend yield on the index is 3% per ann
- You are given the following information concerning two stocks that make up an index. What is the percentage value-weighted return for the index? Shares Outstanding Beginning of Year Price End of year Price Kirk, Inc. 41,000 $88 $93 Picard Co. 63,000 44 5
- Currently the index is standing at 1,067. The risk-free rate is 4% per annum and the dividend yield is 1% per annum. A 6-month European put option on the index with a strike price of 1000 is trading a
- On July 5, a stock index futures contract was at 394.85. The index was at 392.54, the risk-free rate was 2.83 percent, the dividend yield was 2.08 percent, and the contract expired on September 20. Determine whether an arbitrage opportunity was available
- A company's stock is selling for $6.50. The company has no outstanding debt. Analysts consider the liquidation value of the company to be at least $550,000,000 and there are 100,000,000 shares outstanding. What volatility smile would you expect to see?
- The spot price of the market index is $900. After 3 months, the market index is priced at $920. An investor has a long call option on the index at a strike price of $930. After 3 months, what is the investor's profit or loss?
- Assume the following information concerning two stocks that make up an index. What is the value-weighted return for the index? Price per Share Shares Outstanding Beginning of Year End of Year Kirk, Inc. 42,000 $41 $45 Picard Co. 36,000 $76 $82
- Marks Insurance Company sold SP 500 stock index futures that specified an index of 1690 When the position was closed out the index specified by the futures contract was 1720 Determine the profit or lo
- Marks Insurance Company sold S&P 500 stock index futures that specified an index of 1690. When the position was closed out, the index specified by the futures contract was 1720. Determine the profit o
- Do factor (momentum, value, size, etc)-investing ETFs, such as SMLF, beat pure-index ETFs?
- At December 31, 2008, Amad Company had 600,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 200,000 of which were issued on October 1, 2008. Net income for 2008 was $3,000,000, and
- Assume that the S&P 500 composite index is 995.50. This means that a) the average stock in the index is selling for $99.55 b) an investor would have to pay $995.50 to purchase one share of each of t
- The Price/Earnings ratio is a very important measurement to investors. What two factors are considered in its calculation? A. Total inventory and Earnings per share B. Book value and Market Value C. Earnings per share and stock price D. Beta and divid
- Suppose the price for a six-month S&P index futures contract is 552.3. If the risk-free interest rate is 7.5% per year and the dividend yield on the stock index is 4.2% per year, and the market is complete and there is no arbitrage, what is the price of t
- Assume that you own a sizeable investment portfolio that is invested exclusively in a broad-based stock market index fund. Assume also that you contemplate adding a sizeable investment in the stock of
- You are given the following information: Book value of stockholders' equity $2.5 million Price/earnings ratio 10 Shares outstanding 100,000 Market/book ratio 1.5 Calculate the market price of a share of the company's stock. a. $37.50 b. $25 c. $50 d. $75
- You are given the following information: Stockholders' equity = $359 million; price/earnings ratio = 45; shares outstanding = 8,600,000; and market/book ratio = 5.45. Calculate the market price of a share of the company's stock. a. $41.74. b. $227.51. c.
- Consider a stock whose price on 1 January is $120 and which will pay a dividend of $1 on 1 July 2000 and $2 on 1 October 2000. The interest rate is 12%. Is there an arbitrage opportunity if on 1 January 2000 the forward price for delivery of the stock on
- Your stock portfolio consists of only two stocks. You have $60,000 in Company A and $70,000 in Company B. Company A has an actual return of -8% and Company B has a return of 12%. What is the return on
- Your stock portfolio consists of only 2 stocks. You have $15,000 in Company A and $25,000 in Company B. Company A has an actual return of -8%, and Company B has a return of 12%. What is the return on
- Three stocks have share prices of $12, $75, and $30 with total market values of $400 million, $350 million, and $150 million, respectively. What would be the index value for: 1) the price weighted ind
- A company has an EPS of $1.80, a book value per share of $16.56, and a market/book ratio of 1.7x. What is its P/E ratio? The stock price should be rounded to the nearest cent.
- Korman company has the following Securities in its portfolio of trading Securities on December 31st, 2014: 5000 shares of Thomas Corporation common $149,000 at cost $138,000 at fair value. 10000 sha
- During 2014, Rex Company purchased marketable equity securities as a short-term investment. These securities are classified as available for sale. The cost and fair values at December 31, 2014, follow: Security Cost Fair Value Company A-100 shares $2,800
- Currently, the index is standing at 1,079. The risk-free rate is 4% per annum and the dividend yield is 1% per annum. A 6-month European put option on the index with a strike price of 1000 is trading
- Currently the index is standing at 1,066. The risk-free rate is 4% per annum and the dividend yield is 1% per annum. A 6-month European put option on the index with a strike price of 1000 is trading a
- Currently, the index is standing at 1,097. The risk-free rate is 4% per annum and the dividend yield is 1% per annum. A 6-month European put option on the index with a strike price of 1000 is trading
- Santa Claus Enterprises has 174,000 shares of common stock outstanding at a current price of $46 a share. The firm also has two bond issues outstanding. The first bond issue has a total face value of
- Santa Claus Enterprises has 87,000 shares of common stock outstanding at a current price of $39 a share. The firm also has two bond issues outstanding. The first bond issue has a total face value of $
- An investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor uses the 3-months Mini S&P 500 futures contract to hedge. The index is currently 1,500 and one contract is for delivery of $50 times the index. a. If the
- The index currently has a price of 1,000. The price of a six month 1020 strike call is 94.51. In six months the index price is $1,115. What is the profit on the call, if the annual interest rate comp
- When evaluating a publicly traded company, multiplying the number of outstanding shares of stock by the market price per share gives you: a. The value of shareholders' equity as reflected in the company's financial statements. b. The market value of sha
- Suppose one of Fidelity's mutual funds closely mimics the S&P 500 index. The fund has done very well during the year, and, in November, the fund manager wants to lock in the gains he has made using stock index futures. Should he take a long or short posit
- An investor purchased 300 shares of ABC Inc. stock on Tuesday, December 15. ABC paid its quarterly dividend of $1.10 a share on Thursday, December 31. The record date was Friday, December 18. How much
- On July 5 the market index is at 492.54. You hold a portfolio that duplicates the index and is worth 20,500 times the index. You wish to ensure the portfolio at a particular value over the period until September 20. You can buy risk-free debt maturing on
- On July 5, a stock index futures contract was at 394.85. The index was at 392.54, the continuously compounded risk-free rate was 2.83%, the dividend yield was 2.08%, and the contract expired on September 20. Determine if an arbitrage opportunity was avail
- A November $45 call has a premium of $1.10 a share. The underlying stock is priced at $44.15. What is the intrinsic value of the November $45 call?
- You buy 1,000 shares of stock at $5.00 per share in January of 2004. You sell the stock at $7.50 per share in January of 2007. What is your internal rate of return (IRR)? a) 18.00% b) 14.47% c) 1.1
- Consider an index including three tech stocks (one share for each) in year 1. In year 1 (base year), the prices of Google, Apple, and Snapchat are $1, $2, and $3. The Apple stock splits 2-for-1, effective after year 2. In year 2, those prices become $2, $
- Consider a call option with an exercise price of $35 and an expiration date in December and a put option with an exercise price of $35 and an expiration date also in December, both on a stock that is currently selling for $37 per share. Calculate how much
- Assume the following information concerning two stocks that make up an index. What is the price-weighted return for the index? Shares outstanding Price beginning of year Price end of year Picard Co
- You have the following information: a. If you want the beginning price-weighted index of these two stocks to be 1,000. Given this, what is the ending index value? b. If you want the beginning price-we
- Given the information below for Seger Corporation, compute the expected share price at the end of 2014 using price ratio analysis. Year 2008 2009 2010 2011 2012 2013 Price 56.90 62.80 61.50 59.00 80.50 95.90 EPS 2.50 3.21 4.01 4.71 7.05 8.05 CFPS 7.32 8.2
- How is the market cap calculated for companies listed on more than one stock exchange?
- Price Ratio Analysis Given the information below for Seger Corporation, compute the expected share price at the end of 2008 using price ratio analysis. Year 2003 2004 2005 2006 2007 2008 Price $94.5
- A stock purchased on January 1 cost $4.35 per share. The same stock, sold on December 31 of the same year, brought in $4.75 per share. What was the approximate return on this stock? a. 109% b. 9% c. 1.09% d. 0.09%
- Consider a six-month European put option on an index. The current index value is $2030, the strike price is $2090, the dividend yield is 2% per annum, and the continuously compounded risk-free interes
- Assume the following information concerning two stocks that make up an index. What is the value-weighted return for the index? Shares Outstanding Beginning of Year End of Year Kirk, Inc. 33,000 $ 45
- Item: Preferred stock on a company's December 31, 2014 balance sheet.
Explore our homework questions and answers library
Browse
by subject