Homework Problems Ch 2-3, 5.docVIP

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Homework Problems Ch 2-3, 5.doc

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Homework Problems Ch 2-3, 5

FIN 533 Solutions to Homework Problems Chapter 2 2. Percentage Holding Period (HP) Return = [(4400 - 4000 + 4(40))/4000] x 100% = 14% Note: This problem ignores transaction costs. Also, since the stock has been sold, next year’s expected price performance is irrelevant. 3. Percentage HP Return = [(9500 - 10,000 + 2(600))/10,000] x100%= 7% Note: This solution ignores interest the investor may have received from reinvesting the first $600 interest payment. 6. a. Expected Percentage Holding Period Return = [(65 - 60 + 4)/60] x 100% = 15.0% b. Realized Percentage Holding Period Return = [(75 - 60 + 4)/60] x 100% = 31.67% c. Realized Percentage Holding Period Return = [(58 - 60 + 4)/60] x 100% = 3.33% d. Realized Percentage Holding Period Return = [(50 - 60 + 4)/60] x 100% = -10.0% 7. Percentage Holding Period (HP) Return = [($12,800 - $14,000)/$14,000] x 100% = -8.57% 11. Cost per watch Exchange No. of U.S. Swiss Date rate watches Dollar Francs a. 11/15/01 $0.6020/franc 10,000 $75.85 126.0 1,260,000 francs/10000 watches = 126 francs/watch 126 franc/watch x $0.6020.franc = $75.85 $75.85 x 10,000 watches = $758,500 b. 2/20/04 $0.7931/franc 12,000 $99.93 126.0 126.0 francs x $0.7931/franc = $99.93/watch $99.96/watchx 12000 watches = $1,199,160 Note: the cost of the watches in U.S. $ increased because the $ devalued versus the Swiss Franc Exchange Rate Country Currency 11/15/01 7/2/99 a. India Rupee 0 .02084 0.02304 b. Britain Pound 1.4322 1.5765 c. Japan Yen 0.008173 0.008263 d. EurUnion Euro 0.8819 1.0237 e. Canada Dollar 0 .6302 0.6834 a. [(0.02084 - 0.02304)(100)]/0.02304 = -9.55% b. [(1.4322 - 1.5765)(100)]/1.5765 = -9.15% c. [(0.008173 - 0.008263)(100)]/0.008673 = -1.09% d. [(0.8819 – 1.0237)(100)]/1.0237 = -13.85% e. [(0.6302 - 0.6834)(100)]/0.6834 = -7.78% 13. Currency Direct Quote Indirect Quote Rand 0.1660 6.0241 Rupee 0.027