Investment Management (EXERCISE SEASON 2)

Adib Damara Satria

2101808846
MM Business Of Management

Chapter 2.

a. Look at the figure and see the listing for General Dynamics

Net 52 WK 52 WK YTD%
Name Symbol Close Volume Div. Yield P/E
CHG High Low CHG

General
Dynamics GD 67.32 0.47 1,688,963 67.04 35.28 1.52 2.3 11 16.9
Corp.

b. How may shares could you buy for $5,000? = $5,000/ $67.32 : 74.27 I 74 Shares
c. What would be your annual dividend income from those shares ? = 74 . $1.52 :
$112.48 of the total annual dividend income
 d. What must be General Dyanmics earnings per share ? = P/E Ratio I $67.32 / 11 :
6.12 earning per share
e. What was the firm’s closing price on the day before t he listing? = Price – Net
Change I 67.32 – 0.47 : $66.85 of the previous price – lower than current price

Consider 3 stocks in the following table. Pt represent price at time t, and Qt represent shares
outstanding at time t. Stock C splits two for one in the last period.

Po Qo P1 Q1 P2 Q2
A 90 100 95 100 95 100
B 50 200 45 200 45 200
C 100 200 110 200 55 400

a. Calculate the rate of return on a price-weighted index of the three stocks for the first period
(t=0 to t=1).

Answer :

T = 0, index value is (90 + 50 + 100) / 3 = 80

T = 1, index value is (95 + 45 + 110) / 3 = 83.33

ROR is (83.33 – 80) / 80 = 4.17%

b. What must happen to the divisor for the price-weighted index in year 2 ?

Answer :

Set the new divisor (d) = (95 + 45 + 55) / d = 83.33 => d = 2.34

c. Calculate the rate of return for the for the second period (t=1 to t=2)

Answer :

T1, (95+45+110)/3 = 83.3 of index value

T2, (95+45+55)/2.34 = 83.3 of index value

(83.3 – 83.3)/83.3 = 0% rate of return

Diketahui bahwa nilai indeks tetap tidak berubah selama periode kedua, ROR nya
adalah 0
 d. Calculate the first-period rates of return of a market-value-weighted index

Answer :

T = 0, Total market value is ($90 x 100) + ($50 x 200) + ($100 x 200) = $39,000

T = 1, Total market value is ($95 x 100) + ($45 x 200) + ($110 x 200) = $40,500

ROR – Weighted index is = ($40,500 - $39,000) / $39,000 = 3.85%

e. Calculate the first-period rates of return of an equally weighted index

Answer :

- The return on stock A is (95 – 90) / 90 = 5.56%

- The return on stock B is (45 – 50) / 50 = -10%
- The return on stock C is (110 – 100) / 100 = 10%
- ROR equal – weighted index is
(5.56% + -10% + 10%) / 3 = 1.85%