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Problem 10-7 Problem 10-14 Problem 10-18

Fundamentals of Corporate Finance by Brealey, Myers, and Marcus -- Fourth Edition Copyright © 2004 Irwin/McGraw-Hill and KMT Software, Inc. (www.kmt.com)

File: 62567428.xls

Copyright © 1999 Irwin/McGraw-Hill

Printed: 07/09/2011

5 67. At that time only 5 stocks were traded. Myers.5 45. and Marcus 4th Edition Problem 10-7 Objective Construct market indexes Student Name: Course Name: Student ID: Course Number: The accompanying table shows the complete history of stock prices on the Polish stock exchange for 9 weeks in 1991.5 56.5 50 45. Prices (in zlotys) for the first 9 weeks' trading on the Warsaw Stock Exchange beginning in April 1991.5 69 62.5 217 80 56.5 51.5 54 160 72.5 Week 1 2 3 4 5 6 7 8 9 Tonsil (Electronics) 1500 85 76. There was one trading session per week. the other using weights as calculated in the Standard and Poor's Composite Index.5 61 Prochnik (Garments) 1500 56 51 46 41. Stock Krosno Exbud Kable (Glass) (Construction) (Electronics) 2200 1000 1000 59. one using weights as calculated in the Dow Jones Industrial Average. Construct two market indexes.xls Copyright © 2004 Irwin/McGraw-Hill Printed: 07/09/2011 .5 164 80 49 180 80 47 198 79.5 Solution Problem 10-7 Instructions Use the MS Excel AVERAGE function to calculate the average price of stocks for the DJIA method and use the MS Excel SUMPRODUCT function to calculate the total market value for the S&P 500 method.5 149 80 53.Fundamentals of Corporate Finance Brealey.5 38 41.5 196 80 62 177 80 60 160 80. Only five stocks were listed in the first 9 weeks. Dow Jones Method Average price of stocks in market % change in average stock price Index (using DJIA method) Week 1 FORMULA 2 FORMULA 3 FORMULA 4 FORMULA 5 FORMULA 6 FORMULA 7 FORMULA 8 FORMULA 9 FORMULA S&P 500 Method #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA Week 1 2 3 4 5 6 7 8 9 Total Market Value of Stocks FORMULA FORMULA FORMULA FORMULA FORMULA FORMULA FORMULA FORMULA FORMULA % change in total market value Index using S&P Method #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA #VALUE! FORMULA File: 62567428.5 56 61.

Calculate the expected rate of return and standard deviation to Leaning Tower of Pita shareholders.00 $0. The stock is selling today for $80.00 Stock Price $195 $100 $0 Boom Normal economy Recession The company goes out of business if a recession hits.. a restaurant chain will generate the following payoffs to investors next year: Dividend $5. Use the MS Excel STDEVP function to calculate the standard deviation. Inc.xls Copyright © 2004 Irwin/McGraw-Hill Printed: 07/09/2011 .Fundamentals of Corporate Finance Brealey. Solution Problem 10-14 Instructions Enter formulas to calculate the expected rate of return on the stock.00 Expected return each scenario FORMULA FORMULA FORMULA FORMULA FORMULA Boom Normal economy Recession Expected rate of return Standard Deviation File: 62567428.00 $2. Assume for simplicity that the three possible states of the economy are equally likely. Myers. Stock price today $90. and Marcus 4th Edition Problem 10-14 Objective Calculate expected rate of return and standard deviation of a stock Student Name: Course Name: Student ID: Course Number: The common stock of Leaning Tower of Pita.

60 in stocks and .40 in bonds.00% 8. What is the expected return and standard deviation of the portfolio? c. Stocks Bonds Weights 0. and Marcus 4th Edition Problem 10-18 Objective Analyze the risk of a portfolio Student Name: Course Name: Student ID: Course Number: Use the data below and consider portfolio weights of .8 3.24% Standard Deviation 9. What is the expected return and standard deviation of the portfolio? Expected return FORMULA Variance #VALUE! Standard Deviation #VALUE! c.6 Stocks Bonds Portfolio File: 62567428. Myers. Would you prefer to invest in the portfolio of stocks only or in bonds only? Solution Problem 10-18 Instructions Enter formulas to calculate the rates of return for each scenario and the expected return on the portfolio.2 Stocks -5% 15% 25% Bonds 14% 8% 4% a.6 0. Rate of Return Scenario Recession Normal Boom Probability 0. What is the rate of return on the portfolio in each scenario? b.Fundamentals of Corporate Finance Brealey.2 4. What is the rate of return on the portfolio in each scenario? Recession Normal Boom FORMULA FORMULA FORMULA b.40% 10.6 0.4 a.2 0.xls Copyright © 2004 Irwin/McGraw-Hill Printed: 07/09/2011 . Would you prefer to invest in the portfolio of stocks only or in bonds only? (These numbers are from problem 17) Expected Return 13.

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