100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
Solutions for Fundamentals of Investments Valuation and Management, 10th Edition Jordan (All Chapters included) R552,80
Add to cart
Quickly navigate to
Preview
  2.  
  3. Finance
  4.  
  5. Finance

Exam (elaborations)

Solutions for Fundamentals of Investments Valuation and Management, 10th Edition Jordan (All Chapters included)
 2 purchases
  • Course
  • Finance
  • Institution
  • Finance

Complete Solutions Manual for Fundamentals of Investments Valuation and Management, 10th Edition by Bradford D. Jordan, Thomas W. Miller, Steven D. Dolvin ; ISBN13: 9781264412815.....(Full Chapters included Chapter 1 to 21)...Chapter 1: A Brief History of Risk and Return Chapter 2: The Investment ...

[Show more]

Preview 4 out of 370  pages

Document information

  • June 8, 2024
  • 370
  • 2023/2024
  • Exam (elaborations)
  • Questions & answers

Subjects

  • solutions
  • manual
  • answer guide
  • fundamentals
  • investments
  • valuation
  • management
  • 10th edition
  • 10e
  • jordan
  • 9781264412815
  • solutions manual

Written for

  • Finance
  • Finance

Seller

avatar-seller
mizhouubcca

Reviews received

Content preview

Fundamentals of Investments
Valuation and Management
10th Edition by Bradford D. Jordan




Complete Chapter Solutions Manual
are included (Ch 1 to 21)




** Immediate Download
** Swift Response
** All Chapters included
** Excel solutions included

, Chapter 1
A Brief History of Risk and Return


Concept Questions

1. For both risk and return, increasing order is b, c, a, d. On average, the higher the risk of an investment,
the higher is its expected return.

2. Since the price didn’t change, the capital gains yield was zero. If the total return was four percent, then
the dividend yield must be four percent.

3. It is impossible to lose more than –100 percent of your investment. Therefore, return distributions are
cut off on the lower tail at –100 percent; if returns were truly normally distributed, you could lose
much more.

4. To calculate an arithmetic return, you sum the returns and divide by the number of returns. As such,
arithmetic returns do not account for the effects of compounding (and, in particular, the effect of
volatility). Geometric returns do account for the effects of compounding and for changes in the base
used for each year’s calculation of returns. As an investor, the more important return of an asset is the
geometric return.

5. Blume’s formula uses the arithmetic and geometric returns along with the number of observations to
approximate a holding period return. When predicting a holding period return, the arithmetic return
will tend to be too high and the geometric return will tend to be too low. Blume’s formula adjusts these
returns for different holding period expected returns.

6. T-bill rates were highest in the early eighties since inflation at the time was relatively high. As we
discuss in our chapter on interest rates, rates on T-bills will almost always be slightly higher than the
expected rate of inflation.

7. Risk premiums are about the same regardless of whether we account for inflation. The reason is that
risk premiums are the difference between two returns, so inflation essentially nets out.

8. Returns, risk premiums, and volatility would all be lower than we estimated because aftertax returns
are smaller than pretax returns.

9. We have seen that T-bills barely kept up with inflation before taxes. After taxes, investors in T-bills
actually lost ground (assuming anything other than a very low tax rate). Thus, an all T-bill strategy
will probably lose money in real dollars for a taxable investor.

10. It is important not to lose sight of the fact that the results we have discussed cover over 80 years, well
beyond the investing lifetime for most of us. There have been extended periods during which small
stocks have done terribly. Thus, one reason most investors will choose not to pursue a 100 percent
stock (particularly small-cap stocks) strategy is that many investors have relatively short horizons, and
high volatility investments may be very inappropriate in such cases. There are other reasons, but we
will defer discussion of these to later chapters.

,Solutions to Questions and Problems

NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple
steps. Due to space and readability constraints, when these intermediate steps are included in this solutions
manual, rounding may appear to have occurred. However, the final answer for each problem is found
without rounding during any step in the problem.

Core Questions

1. Total dollar return = 100($41 – $37 + $.28) = $428.00
Whether you choose to sell the stock does not affect the gain or loss for the year; your stock is worth
what it would bring if you sold it. Whether you choose to do so or not is irrelevant (ignoring
commissions and taxes).

2. Capital gains yield
= ( $41 – $37 ) / $37 .1081, or 10.81%
=
Dividend
= yield $.28
= / $37 .0076, or .76%
Total rate of return = 10.81% + .76% = 11.57%

3. Dollar return = 500($34 – $37 + $.28) = –$1,360
Capital gains yield
= ( $34 – $37 ) / $37 – .0811, or – 8.11%
=
Dividend
= yield $.28
= / $37 .0076, or .76%
Total rate of return = –8.11% + .76% = –7.35%

4.
a. average return = 6.0%, average risk premium = 2.7%
b. average return = 3.3%, average risk premium = 0%
c. average return = 12.3%, average risk premium = 9.0%
d. average return = 16.3%, average risk premium = 13.0%

5. Cherry average return = (17% + 11% – 2% + 3% + 14% ) / 5 = 8.60%
Straw average return= (16% + 18% – 6% + 1% + 22% ) / 5 = 10.20%

6. Cherry: R A = 8.60%
(.17 – .086 ) + (.11 – .086 ) + ( –.02 – .086 ) + (.03 – .086 ) + (.14 – .086 ) =
2 2 2 2 2
Var
=  .00623
 
(.00623)
1/2
Standard=
deviation = .0789, or 7.89%

Straw: R B = 10.20%
= 1/ 4 (.16 – .102 ) + (.18 – .102 ) + ( –.06 – .102 ) + (.01 – .102 ) + (.22 – .102 )  = .01452
2 2 2 2 2
Var
 
(.01452 )
1/2
Standard=
deviation = .1205, or 12.05%

7. The capital gains yield is ( $59 – $65 ) / $65 = – .0923 , or –9.23% (notice the negative sign). With
a dividend yield of 1.2 percent, the total return is –8.03%.

, (1/5)
8. Geometric return =(1 + .17 )(1 + .11)(1 − .02 )(1 + .03)(1 + .14 )  – 1 = .0837, or 8.37%

9. Arithmetic return = (.21 + .12 + .07 – .13 – .04 + .26 ) / 6 = .0817, or 8.17%
(1/ 6 )
Geometric return = (1 + .21)(1 + .12 )(1 + .07 )(1 – .13)(1 – .04 )(1 + .26 )  – 1 =
.0730, or 7.30%

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying this summary from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller mizhouubcca. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy this summary for R552,80. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

64302 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy summaries for 15 years now

Start selling

Recently viewed by you

Exam (elaborations) ·

(0)

APEA Predictor Exam Questions and Answers with Rationale-Pre-Predictor 2023/2024 LATEST VERSION 80 PLUS PAGES

Exam (elaborations) ·

(0)

Test Bank For Environmental Geology 12th Edition By Carla W. Montgomery, Gina Seegers-Szablewski Chapter 1-20

Other ·

(0)

Variva Gespecialiseerd pedagogisch medewerker examen B02: Stimuleer en volg de ontwikkeling door activiteiten

Exam (elaborations) ·

(0)

2023 RN HESI EXIT EXAM - Version 1 (V1) All 160 Qs & As Included - Guaranteed Pass A+ (All Brand New Q&A Pics Included)

Exam (elaborations) ·

(0)

NSG 6320 AGNP BOARD EXAM ASSESSMENT GASTROENTEROLOGY (84 QUESTIONS)| AGNP BOARD EXAM ASSESSMENT GASTROENTEROLOGY (2020)

Exam (elaborations) ·

(0)

Test Item File- Practice Test Bank - Strategic Management A Competitive Advantage Approach, Concepts and Cases,David,16e

Exam (elaborations) ·

(2)

Complete Test Bank Chemical Principles 8th Edition Zumdahl Questions & Answers with rationales (Chapter 2-21)

Exam (elaborations) ·

(0)

Test Bank - Nursing in Today's World: Trends, Issues, and Management, 12th Edition (Buckway, 2023), Chapter 1-15 | All Chapters

Exam (elaborations) ·

(1)

CALIFORNIA LAW EXAM PHYSICAL THERAPY 2024 ACTUAL EXAM QUESTIONS AND CORRECT DETAILED ANSWERS WITH RATIONALES

R552,80  2x  sold
  • (0)
Add to cart
Added