Exactly one year ago you purchased 100 shares of Union Pacific Corporation for $65.

72
per share. Today’s stock price is $87.59, and over the past year you received dividends
of $1.20 per share. What is the percentage increase in price? What is the percentage
return from dividends? What is you total return for the year?

inputs
Q 100
P(0) $65.72
P(1) $87.59
div $1.20
 percentage
initial investment $6,572
dividend $120 1.83%
capital gains $2,187 33.28%
total gain $2,307 35.10%
Two years ago you purchased a share of stock for $24.375. The first year that you
owned the stock you received an 80% return; over the second year, however, the stock
fell by 51%. What is your share of stock worth today? What was your average rate of
return? What was your holdings period return?
inputs
P $24.375
return(1) 80%
return (2) -51%
 0 1 2
$24.38 $43.88 $21.50

avg return 14.5%

holding period -11.8% -11.8%
Suppose that you are considering investing in one of two stocks. Both cost $100 per
share. Share A promises a $3.60 dividend and should be worth $108.40 next year. Share
B, on the other hand promises a $4.80 dividend and will be worth $107.20 next year.
Which stock is the better investment?
inputs

P(A)0 $100
P(B)0 $100

div(A) $3.60
div(B) $4.80

E[P(A)1] $108.40
E[P(B)1] $107.20
 A B
percentage percentage
initial investment $100 $100
dividend $3.60 3.60% $4.80 4.80%
capital gains $8.40 8.40% $7.20 7.20%
total gain $12 12.00% $12 12.00%
Suppose that, one year ago, you bought 100 shares of Bradley Corporation common stock
for $32 per share. During the year, you have received total dividends of $250. Bradley
common stock is currently selling for $33.50 per share. How much did you earn in
capital gains? What was your total dollar return? Calculate your capital gains yield,
divided yield and total percentage return.
inputs
Q 100
P(0) $32
dividend $250
P(1) $33.50
 percentage
initial investment $3,200
dividend $250
capital gains $150 4.69% capital gains yield
total dollar return $400 12.50% total percentage return
A stock had returns of 8%, -2%, 4%, and 16% over the past four years. What is the standard
deviation of this stock for the past four years?
inputs
return 1 8%
return 2 -2%
return 3 4%
return 4 16%
 s = sqrt(s2)

formula excel
average 6.500% 6.500%
variance 0.570% 0.570%
stdev 7.550% 7.550%
What are the arithmetic and geometric average returns for a stock with annual returns of
4%, 9%, -6%, and 18%?
inputs
return 1 4%
return 2 9%
return 3 -6%
return 4 18%

average pulled r
 formula excel
average 6.250% 6.250%
geo average 5.893% 5.893%

0 1 2 3 4
actual $1.000 $1.040 $1.134 $1.066 $1.257
geo mean $1.000 $1.059 $1.121 $1.187 $1.257

actual $1.000 $1.04 $1.09 $0.94 $1.18

pull returns out $0.04 $0.09 ($0.06) $0.18
average pulled return $0.0625
A stock had the following prices and dividends. What is the geometric average return on
this stock

Year Price Dividend

1 $23.19 -
2 $24.90 $.23
3 $23.18 $.24
4 $24.86 $.25

inputs

year Price
1 $23.19
2 $24.90
3 $23.18
4 $24.86
Dividend Return

$0.23 8.37%
$0.24 -5.94%
$0.25 8.33% formula excel
geo average 3.356% 3.356%
The returns for IMB over the last 3 years are given as follows: Year 1 return = 10%,
Year 2 return = 15%, Year 3 return = 12%.. Assuming no dividends were paid, what
was the 3-year holding period return?
inputs
return 1 10%
return 2 15%
return 3 12%
$1.0000
$1.1000
$1.2650
$1.4168

geo return 41.680%

By investing 25.6 million, you are able to set up the following position: You purchase a
position in a reverse-swaption on the Euro with an notional principal of $238M US. It
also has a putable conversion option embedded in it also expiring in six months with a
1.7 conversion ratio. The position is hedged against a change in oil prices by purchasing
100,000 forward contracts of crude at $50/barrel expiring in 6 months. You expect the
dollar to appreciate by 13% over the next 6 months, but inflation is expected to be 2.5%
in the US and only 1.7% in the euro-zone. After six months, you find that you can
liquidate the entire position for 32.8 million, but note that the crude market is now in
contango. What is you return on the position?

inputs
invest
final value
$25,600,000
$32,800,000

return 28.13%