Instructions: Please show calculations in a word document.Problem #1Information about three...

Question

Instructions: Please show calculations in a word document.Problem #1Information about three securities appears below.Beginning –of-Year Price End-of-Year Price Interest/Dividend PaidStock 1 $42.50 $46.75 $1.50Stock 2 $ 1.25 $ 1.36 $0.00Bond 1 $1,020 $1,048 $41.00  	Assuming interest and dividends are paid annually; calculate the annual holding period return on each security. 	During the year management of Stock 2 spent $10 million, or $0.50 a share, repurchasing 7.7 million of the company’s shares. How, if at all, does this information affect calculation of the holding period return on Stock 2?  Problem #2Magenta Corporation wants to raise $50 million in a seasoned equity offering, net of all fees. Magenta stock currently sells for $10 per share. The underwriters will require a spread of $0.50 per share, and indicate that the issue must be underpriced by 5 percent. In addition to the underwriter’s fee, the firm will incur $1,000,000 in legal, accounting, and other costs. How many shares must Magenta sell?
	
Document Preview: Instructions:  Please show calculations in a word document.Problem #1Information about three securities appears below.   Beginning –of-Year Price	   End-of-Year Price	Interest/Dividend PaidStock 1	$42.50				    $46.75			         $1.50Stock 2	$ 1.25				    $ 1.36			          $0.00Bond 1	$1,020				   $1,048			         $41.00Assuming interest and dividends are paid annually; calculate the annual holding period return on each security.During the year management of Stock 2 spent $10 million, or $0.50 a share, repurchasing 7.7 million of the company’s shares.  How, if at all, does this information affect calculation of the holding period return on Stock 2?Problem #2Magenta Corporation wants to raise $50 million in a seasoned equity offering, net of all fees.  Magenta stock currently sells for $10 per share.  The underwriters will require a spread of $0.50 per share, and indicate that the issue must be underpriced by 5 percent.  In addition to the underwriter’s fee, the firm will incur $1,000,000 in legal, accounting, and other costs.  How many shares must Magenta sell?

Robert · Accepted Answer

Instructions:  Please show calculations in a word document.
Problem #1
Information about three securities appears below. 
   Beginning –of-Year Price    End-of-Year Price Interest/Dividend Paid 
Stock 1 $42.50        $46.75            $1.50 
Stock 2 $ 1.25        $ 1.36             $0.00 
Bond 1 $1,020       $1,048            $41.00
a. Assuming interest and dividends are paid annually; calculate the annual holding 
period return on each security.
Solution 
Holding period return on stock 1 = [(46.75 – 42.50) + 1.50] / 42.50 
     = 13.53% 
Holding period return on stock 2 = [(1.36 – 1.25) + 0] / 1.25 
     = 8.8% 
Holding period return on stock 3 = [(1,048 – 1,020) + 41] / 1,020 
     = 6.

Instructions: Please show calculations in a word document. Problem #1 Information about three securities appears below. Beginning –of-Year Price End-of-Year Price Interest/Dividend Paid Stock 1 $42.50...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment