FIN 515 Devry entire course DEVRY FIN 515 Week 5 Problem Set

DEVRY FIN 515 Week 5 Problem Set

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FIN 515 Week 5 Problem Set
Chapter 10 (pages 345–348)
4. You bought a stock one year ago for $50 per share and sold it today for $55 per
share. It paid a $1 per share dividend today.
a. What was your realized return?
b. How much of the return came from dividend yield and how much came from
capital gain?

20. Consider two local banks. Bank A has 100 loans outstanding, each for $1 million,
that it expects will be repaid today. Each loan has a 5% probability of default, in
which case the bank is not repaid anything. The chance of default is independent
across all the loans. Bank B has only one loan of $100 million outstanding, which it
also expects will be repaid today. It also has a 5% probability of not being repaid.
Explain the difference between the type of risk each bank faces. Which bank faces
less risk? Why?
22. Consider the following two, completely separate, economies. The expected return
and volatility of all stocks in both economies is the same. In the first economy, all
stocks move together—in good times all prices rise together and in bad times they all