Stocks and Bonds

UNIVERSITY OF THE EAST -CALOOCAN
Civil Engineering Department
Stocks and Bonds
SUBMITTED BY
Julie Ann Zafra
20191179836
SUBMITTED TO:
Engr. Reyman Solas
October 3, 2022
NCE 4103 - ENGINEERING ECONOMICS 2022
01. Jazz Recording Company’s preferred stock is currently selling at P1000.00 per share. If each
share is guaranteed an annual dividend of P85.00, determine the rate of return realized from a
Jazz stock investment.
SOLUTION:
𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 =
𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑠𝑡𝑜𝑐𝑘 𝑝𝑟𝑖𝑐𝑒
𝑃85.00
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 =
𝑃1000.00
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 = 0.0085
𝑹𝒂𝒕𝒆 𝒐𝒇 𝒓𝒆𝒕𝒖𝒓𝒏 = 𝟖. 𝟓%
Answer: 8.5%
02. Determine the cost of capital for a company if it sells P500.00, 10% dividend preferred stocks at
7.5% discount.
SOLUTION:
𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 ∗ 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑎𝑡𝑒
𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 = 𝑃500 ∗ 10%
𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 = 𝑃50
𝐹𝑙𝑜𝑎𝑡𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 ∗ 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒
𝐹𝑙𝑜𝑎𝑡𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 = 𝑃500 ∗ 7.5%
𝐹𝑙𝑜𝑎𝑡𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 = 𝑃37.50
𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 =
(𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑚𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 − 𝐹𝑙𝑜𝑎𝑡𝑎𝑡𝑖𝑜𝑛 𝑐𝑜𝑠𝑡)
𝑃50
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 =
(𝑃500 − 𝑃37.50)
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 = 0.1081081081
1|P age
𝑪𝒐𝒔𝒕 𝒐𝒇 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 = 𝟏𝟎. 𝟖𝟏%
Answer: 10.81%
03. The preferred stock for Ironhide Steel Corporation guarantees annual dividends of P50.00 per
share. If a investor desires a rate of return of 10% for his investment, how much should he be
willing to pay for a share of Ironhide stock?
SOLUTION:
𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝑃𝑟𝑖𝑐𝑒 =
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛
𝑃50
10%
𝑷𝒓𝒊𝒄𝒆 = 𝑷𝟓𝟎𝟎. 𝟎𝟎
Answer: P500.00
04. To raise P50M for its expansion projects Barricade Security Industries is issuing 125000 shares of
preferred stock. If each share is guaranteed an annual dividend of P32.00, determine a) the par
value stock; b) the cost of capital for the company.
SOLUTION:
𝐴𝑚𝑜𝑢𝑛𝑡 𝑟𝑎𝑖𝑠𝑒𝑑
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑖𝑠𝑠𝑢𝑒𝑑
𝑃50,000,000
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 =
125,000
𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝒔𝒕𝒐𝒄𝒌 = 𝑷𝟒𝟎𝟎. 𝟎𝟎
𝐴𝑚𝑜𝑢𝑛𝑡 𝑝𝑟𝑒𝑑𝑒𝑟𝑟𝑒𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑

𝐶𝑜𝑠𝑡 𝑝𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑠𝑡𝑜𝑐𝑘 =
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘
𝑃32.00
𝐶𝑜𝑠𝑡 𝑝𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑠𝑡𝑜𝑐𝑘 =
125,000
𝑪𝒐𝒔𝒕 𝒑𝒓𝒆𝒇𝒆𝒓𝒓𝒆𝒅 𝒔𝒕𝒐𝒄𝒌 = 𝟖%
Answer: P400/share, 8%
2|P age
05. Determine the expected rate of return for a Stark Industries common stock that is currently
priced at P95.00. Annual dividends of P4.75 per share have been paid regularly and a growth
rate of 5% is projected.
SOLUTION:
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
(𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑟𝑎𝑡𝑒 − 𝑔𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒)
𝑃4.75
𝑃95 =
(𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑟𝑎𝑡𝑒 − 5%)
𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑟𝑎𝑡𝑒 − 0.05 = 0.05
𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑟𝑎𝑡𝑒 = 0.05 + 0.05
𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑟𝑎𝑡𝑒 = 0.01
𝑹𝒆𝒒𝒖𝒊𝒓𝒆𝒅 𝒓𝒂𝒕𝒆 = 𝟏𝟎%
Answer: 10%
06. Common stocks for Daily Planet Advertising &News Corporation just paid dividends of P11.50
per share. This is P1.50 higher than last year’s dividend payments. Assuming the growth rate
remains constant, determine the dividend payment three year from now.
SOLUTION:
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 − 𝐼𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑎𝑚𝑜𝑢𝑛𝑡
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 = 𝑃11.50 − 𝑃1.50
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 = 𝑃10.00
𝐼𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝐺𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒 =
𝐿𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝑃1.50
𝐺𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒 =
𝑃10.00
𝐺𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒 = 15.00%
3|P age
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 𝑎𝑓𝑡𝑒𝑟 3 𝑦𝑒𝑎𝑟 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑥(1 + 𝐺𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒)3
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 𝑎𝑓𝑡𝑒𝑟 3 𝑦𝑒𝑎𝑟 = 𝑃11.50𝑥(1 + 15%)3
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒂𝒊𝒅 𝒂𝒇𝒕𝒆𝒓 𝟑 𝒚𝒆𝒂𝒓 = 𝑷𝟏𝟕. 𝟒𝟗
Answer: P17.49/share
07. A company that is currently enjoying a 12.5% growth rate expects to pay dividends of P4.50 per
share for its common stock offerings. If the estimated cost of capital for the company is 20%,
determine the price for which the stocks should be offered.
SOLUTION:
𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝑆𝑡𝑜𝑐𝑘 𝑃𝑟𝑖𝑐𝑒 =
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 − 𝐺𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒
𝑃4.50
20% − 12.5%
𝑃4.50
7.5%
𝑺𝒕𝒐𝒄𝒌 𝑷𝒓𝒊𝒄𝒆 = 𝑷𝟔𝟎
08. Two years ago, the initial public offering for a share of Wayne Industries common stock was
P75.00. Last year, an investor computed a rate return of 15% after receiving dividends of P6.00
per share. Assuming a constant growth rate, determine the dividend to be paid this year.
SOLUTION:
𝐺𝑖𝑣𝑒𝑛 𝑡ℎ𝑒 𝑠𝑡𝑜𝑐𝑘 𝑝𝑟𝑖𝑐𝑒 = 𝑃75
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 = 15%
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑎𝑚𝑜𝑢𝑛𝑡 = 𝑃6
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 𝑎𝑓𝑡𝑒𝑟 𝑜𝑛𝑒 𝑦𝑒𝑎𝑟 = 75(1 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒) 𝑦𝑒𝑎𝑟
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 𝑎𝑓𝑡𝑒𝑟 𝑜𝑛𝑒 𝑦𝑒𝑎𝑟 = 75(1 + 15%)1
115
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 𝑎𝑓𝑡𝑒𝑟 𝑜𝑛𝑒 𝑦𝑒𝑎𝑟 = 75𝑥( )
100
4|P age
𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 𝑎𝑓𝑡𝑒𝑟 𝑜𝑛𝑒 𝑦𝑒𝑎𝑟 = 86.25
6
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑎𝑚𝑜𝑢𝑛𝑡 = 𝑥85.25
75
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑎𝑚𝑜𝑢𝑛𝑡 = 0.08𝑥85.25
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒂𝒎𝒐𝒖𝒏𝒕 = 𝟔. 𝟖𝟐 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆𝒔
Answer: P6.42/share
09. The table below shows the market performance for a share of common stock in a multi-national
corporation.
Date Price Dividends Paid
January 24, 2005 P60.00 P5.00
January 24, 2006 P63.00 P5.50
January 24, 2007 P67.00 P6.05
January 24, 2008 P74.00 P7.49
If an investor purchased shares on January 24, 2005, determine the rate of return realized for a two-year
holding period.
SOLUTION:
𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠 = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑔𝑎𝑖𝑛𝑠 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠 = 63 − 60 + 5.5
𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠 = 8.5
𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠

𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛 =
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑝𝑟𝑖𝑐𝑒
8.5
𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛 = 𝑥100
60
𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛 = 14.17%
𝑆𝑒𝑐𝑜𝑛𝑑 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠 = 67 − 63 + 6.05
5|P age
𝑆𝑒𝑐𝑜𝑛𝑑 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠 = 10.05
10.05
𝑆𝑒𝑐𝑜𝑛𝑑 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛 = 𝑥100
63
𝑆𝑒𝑐𝑜𝑛𝑑 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛 = 15.95%
𝑇ℎ𝑖𝑟𝑑 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛 = 74 − 67 + 7.4
𝑇ℎ𝑖𝑟𝑑 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛 = 14.4
14.4
𝑇ℎ𝑖𝑟𝑑 𝑦𝑒𝑎𝑟 ′ 𝑠 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 = 𝑥100
67
𝑇ℎ𝑖𝑟𝑑 𝑦𝑒𝑎𝑟 ′ 𝑠 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 = 21.49%
𝑓𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛 + 𝑠𝑒𝑐𝑜𝑛𝑑 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛

𝑇𝑤𝑜 𝑦𝑒𝑎𝑟𝑠 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 =
2
14.17 + 15.95
𝑇𝑤𝑜 𝑦𝑒𝑎𝑟𝑠 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 =
2
𝑻𝒘𝒐 𝒚𝒆𝒂𝒓𝒔 𝒉𝒐𝒍𝒅𝒊𝒏𝒈 𝒑𝒆𝒓𝒊𝒐𝒅 𝒓𝒆𝒕𝒖𝒓𝒏 = 𝟏𝟓. 𝟎𝟔%
Answer: 15%
10. Same as problem no.09, except that the holding period is until January 24, 2008.
SOLUTION:
14.17 + 15.95 + 21.49%

𝑇ℎ𝑟𝑒𝑒 𝑦𝑒𝑎𝑟𝑠 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 =
3
𝑻𝒉𝒓𝒆𝒆 𝒚𝒆𝒂𝒓𝒔 𝒉𝒐𝒍𝒅𝒊𝒏𝒈 𝒑𝒆𝒓𝒊𝒐𝒅 𝒓𝒆𝒕𝒖𝒓𝒏 = 𝟏𝟕. 𝟐𝟎%
Answer: 17%
6|P age
11. With reference to problem no. 09, on January 24, 2009 the stock price plunges to P62.00 with a
P3.00 dividend paid per share. Determine the rate of return for the four-year holding period.
SOLUTION:
𝑇𝑜𝑡𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑 𝑖𝑛 𝑓𝑜𝑢𝑟 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑

= 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 𝑓𝑜𝑟 (𝐽𝑎𝑛𝑢𝑎𝑟𝑦 25, 2006 + 𝐽𝑎𝑛𝑢𝑎𝑟𝑦 24, 2007 + 𝐽𝑎𝑛𝑢𝑎𝑟𝑦 24, 2008
+ 𝐽𝑎𝑛𝑢𝑎𝑟𝑦 24, 2009)
𝑇𝑜𝑡𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑 𝑖𝑛 𝑓𝑜𝑢𝑟 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 = 𝑃5.50 + 𝑃6.05 + 𝑃7.49 + 𝑃3.00
𝑇𝑜𝑡𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑 𝑖𝑛 𝑓𝑜𝑢𝑟 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 = 𝑃22.04
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑔𝑎𝑖𝑛 𝑜𝑛 𝑠𝑡𝑜𝑐𝑘

= 𝑆𝑡𝑜𝑟𝑐𝑘 𝑝𝑟𝑖𝑐𝑒 𝑜𝑛 𝐽𝑎𝑛𝑢𝑎𝑟𝑦 24, 2009(𝑆𝑎𝑙𝑒 𝑝𝑟𝑖𝑐𝑒)
− 𝑆𝑡𝑜𝑐𝑘 𝑝𝑟𝑖𝑐𝑒 𝑜𝑛 𝐽𝑎𝑛𝑢𝑎𝑟𝑦 24, 2005(𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒)
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑔𝑎𝑖𝑛 𝑜𝑛 𝑠𝑡𝑜𝑐𝑘 = 𝑃62 − 𝑃60
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑔𝑎𝑖𝑛 𝑜𝑛 𝑠𝑡𝑜𝑐𝑘 = 𝑃2
(𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛)

𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑝𝑟𝑖𝑐𝑒
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑓𝑜𝑢𝑟 − 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 =
4
(𝑃22.04 + 𝑃2)
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑓𝑜𝑢𝑟 − 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 = 𝑃60
4 𝑦𝑒𝑎𝑟𝑠
0.40066666667
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑓𝑜𝑢𝑟 − 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 =
4 𝑦𝑒𝑎𝑟𝑠
𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑓𝑜𝑢𝑟 − 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 = 0.1001666667
𝑹𝒂𝒕𝒆 𝒐𝒇 𝒓𝒆𝒕𝒖𝒓𝒏 𝒇𝒐𝒓 𝒕𝒉𝒆 𝒇𝒐𝒖𝒓 − 𝒚𝒆𝒂𝒓 𝒉𝒐𝒍𝒅𝒊𝒏𝒈 𝒑𝒆𝒓𝒊𝒐𝒅 = 𝟏𝟎%
Answer: 10%
7|P age
12. Cyclops Visor Corporation just issued dividends of P25.00 for a share of its common stocks. The
current price of a share is P800.00. If a Cyclops stock has an annual growth rate of 10%,
determine its market value after three years for an investor to realize a 20% rate of return.
SOLUTION:
𝐿𝑒𝑡 𝐷𝑛 𝑑𝑒𝑛𝑜𝑡𝑒 𝑡ℎ𝑒 𝑑𝑖𝑣𝑖𝑑𝑒𝑑 𝑖𝑛 𝑦𝑒𝑎𝑟 𝑛.
𝐿𝑒𝑡 𝑃3 𝑑𝑒𝑛𝑜𝑡𝑒 𝑡ℎ𝑒 𝑝𝑟𝑖𝑐𝑒 𝑎𝑓𝑡𝑒𝑟 3 𝑦𝑒𝑎𝑟𝑠.
𝐷0 = 𝑃25
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑠𝑡𝑜𝑐𝑘 𝑝𝑟𝑖𝑐𝑒(𝑃0 ) = 𝑃800
𝐺𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒(𝑔) = 10%
𝑅𝑒𝑡𝑢𝑟𝑛(𝑟) = 20%
𝐷1 𝐷2 𝐷3 𝑃3
𝑃0 = + 2
+ 3
+
1 + 𝑟 (1 + 𝑟) (1 + 𝑟) (1 + 𝑟)3
𝐷1 = 1.1 ∗ 25 = 𝑃27.50
𝐷2 = (1.1)2 ∗ 25 = 𝑃30.25
𝐷3 = (1.1)3 ∗ 25 = 𝑃33.275
27.50 30.25 33.275 𝑃3

𝑃800 = + 2
+ 3
+
1.2 1.2 1.2 1.23
𝑷𝟑 = 𝑷𝟏𝟐𝟕𝟑. 𝟐𝟑
13. Based on a company’s P5.00 dividend payments and estimated future value of P200.00 per
share after two years, an investor bought common stocks at P155.00 per share. Determine the
growth rate for the investor to realize a rate of return of 17%.
SOLUTION:
𝐿𝑒𝑡 𝑡ℎ𝑒 𝑔𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒 = 𝑔
𝐿𝑒𝑡 𝐷𝑛 𝑏𝑒 𝑡ℎ𝑒 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑖𝑛 𝑦𝑒𝑎𝑟 𝑛.
𝐷0 = 𝑃5
𝐷1 = 5(1 + 𝑔)
𝐷2 = 5(1 + 𝑔)2
8|P age
𝑃0 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑃𝑟𝑖𝑐𝑒 = 𝑃155
𝑃2 = 𝑃𝑟𝑖𝑐𝑒 𝑎𝑓𝑡𝑒𝑟 2 𝑦𝑒𝑎𝑟𝑠 = 𝑃200
𝑟 = 17%
𝐷1 𝐷2 𝑃2
𝑃0 = + 2
+
1 + 𝑟 (1 + 𝑟) (1 + 𝑟)2
5(1 + 𝑔) 5(1 + 𝑔)2 𝑃200

𝑃155 = + +
1.17 1.172 1.172
5(1 + 𝑔) 5(1 + 𝑔)2

+ = 8.89729
1.17 1.172
4.27350(1 + 𝑔) + 3.65257(1 + 𝑔)2 = 8.89729
𝒈 = 𝟖%
Answer: 8%
14. Common stocks for Starscream Rocket Corporation just paid P15.00 dividends per share. The
company’s financial records indicate a constant growth rate of 9%. Determine the current
market price, if an investor computed an 18% rate of return based on the speculation that the
price will increase by 50% three years from now.
SOLUTION:
𝐷0 = 𝑃15
𝐿𝑒𝑡 𝑃 0 𝑏𝑒 𝑡ℎ𝑒 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑖𝑐𝑒 𝑎𝑛𝑑 𝑃 3 𝑏𝑒 𝑡ℎ𝑒 𝑝𝑟𝑖𝑐𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡ℎ𝑟𝑒𝑒 𝑦𝑒𝑎𝑟𝑠.
𝑃 3 𝑖𝑠 ℎ𝑖𝑔ℎ𝑒𝑟 𝑡ℎ𝑎𝑛 𝑃 0 𝑏𝑦 50%
𝑃 3 = (1.50)
𝑃 0 = 1.5𝑃
𝑟 = 18%
𝐺𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒 (𝑔) = 9%
𝐷1 = 𝐷0 (1 + 𝑔) = 𝑃16.35
𝐷2 = 𝐷0 (1 + 𝑔)2 = 𝑃17.8215
𝐷2 = 𝐷0 (1 + 𝑔)3 = 𝑃19.4254
9|P age
𝐷1 𝐷2 𝐷3 𝑃3
𝑃0 = + 2
+ 3
+
1 + 𝑟 (1 + 𝑟) (1 + 𝑟) (1 + 𝑟)3
16.35 17.8215 19.4254 1.5𝑃

𝑃0 = + 2
+ 3
+
1.18 (1.18) (1.18) (1.18)3
0.08705𝑃0 = 38.478
𝑷𝟎 = 𝑷𝟒𝟒𝟐
Answer: P442/share
15. EE Board Exam April 1997
P1000.00 face-value bond pays dividends of P110.00 at the end of each year. If the bond matures in
20 years, what is the approximate bond value at an investment rate of 12% compounded annually?
SOLUTION:
𝑃 𝑃
𝑃 = (110) ( , 12%, 20) + (𝑃1000) ( , 12%, 20)
𝐴 𝐹
(1.12)20 − 1
𝑃 = (110) ( ) + (𝑃1000)(1 + 0.12)−20
(0.12)(1.12)20
𝑃 = (110)(7.4694) + (𝑃1000)(0.1037)
𝑷 = 𝑷𝟗𝟐𝟓. 𝟎𝟎
Answer: P925.00
16. EE Board Exam April 2004
A bond with a par value of P1000.00 and with a bond rate of 9% payable annually is to be redeemed
at P1050.00 at the end of 6 years. If it is sold now, what should be the selling price to yield 8%?
Answer: P1077.74
17. A P1000.00 14% bond will mature in eight years. If interest is to be paid quarterly, find the price
to realize a yield to maturity of 12.55%.
SOLUTION:
𝐹 = 𝑀𝑎𝑡𝑢𝑟𝑖𝑡𝑦 𝑉𝑎𝑙𝑢𝑒
10 | P a g e
𝑃𝑉 = 𝑃𝑟𝑖𝑐𝑒 𝑜𝑓 𝑏𝑜𝑛𝑑 = 𝑃1000
𝑌𝑇𝑀 = 𝑌𝑖𝑒𝑙𝑑 𝑡𝑜 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦 = 14%
𝑛 = 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 = 4
𝑡 = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑦𝑒𝑎𝑟𝑠 = 8 𝑦𝑒𝑎𝑟𝑠
𝑌𝑇𝑀 𝑡𝑛
𝐹 = 𝑃𝑉 (1 + )
𝑛
0.14 8∗4
𝐹 = 1000 (1 + )
4
𝐹 = 1000(1.035)32
𝐹 = 1000 ∗ 3.0067
𝐹 = 𝑃3006.7
𝑌𝑇𝑀 = 𝑌𝑖𝑒𝑙𝑑 𝑡𝑜 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦 = 12.55%
0.1255 8∗4
𝐹 = 𝑃𝑉 (1 + )
4
𝐹 = 𝑃𝑉(1.031375)32
𝐹 = 2.68𝑃𝑉
𝑃3006.7 = 2.68𝑃𝑉
𝑃3006.7
𝑃𝑉 =
2.68
𝑷𝑽 = 𝑷𝟏𝟏𝟐𝟏. 𝟗
Answer: P1101.94
11 | P a g e
18. A bank offers 8% interest compounded quarterly. Determine the required selling price for a
P10000.00, 8-year, 7% convertible bond that pays interest every three months if an investor
wants to realize the same rate of return form the purchase.
SOLUTION:
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑅𝑎𝑡𝑒 = 8% 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒 = 2% 𝑝𝑒𝑟 𝑞𝑢𝑎𝑟𝑡𝑒𝑟
𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒 = 𝑃10,000
𝑇𝑖𝑚𝑒 𝑃𝑒𝑟𝑖𝑜𝑑(𝑛) = 8% 𝑖. 𝑒. 32 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑠
𝐶𝑜𝑢𝑝𝑜𝑛 𝑅𝑎𝑡𝑒
𝐶𝑜𝑢𝑝𝑜𝑛 = ∗ 𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒
4
7%
𝐶𝑜𝑢𝑝𝑜𝑛 = ∗ 𝑃10,000 = 175
4
[1 − (1 + 𝑟)−𝑛 ] 𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒

𝑃𝑟𝑖𝑐𝑒 = 𝐶𝑜𝑢𝑝𝑜𝑛 ∗ +
𝑟 (1 + 𝑟)𝑛
[1 − (1.02)−32 ] 10,000
𝑃𝑟𝑖𝑐𝑒 = 175 ∗ +
0.02 1.0232
𝑃𝑟𝑖𝑐𝑒 = 4016.96 + 5306.33
𝑷𝒓𝒊𝒄𝒆 = 𝑷𝟗𝟒𝟏𝟑. 𝟐𝟗
Answer: P9413.29
19. Same as problem no. 18, except the bond pays interest every six months.
SOLUTION:
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑣𝑒𝑟𝑦 6 𝑚𝑜𝑛𝑡ℎ𝑠
𝐶𝑜𝑢𝑝𝑜𝑛 𝑅𝑎𝑡𝑒
𝐶𝑜𝑢𝑝𝑜𝑛 = ∗ 𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒
2
7%
𝐶𝑜𝑢𝑝𝑜𝑛 = ∗ 𝑃10,000 = 350
2
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 𝑝𝑒𝑟 𝑞𝑢𝑎𝑟𝑡𝑒𝑟 = 2%
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 𝑝𝑒𝑟 𝑠𝑒𝑚𝑖 𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑒𝑟𝑖𝑜𝑑 = (1 + 𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 𝑝𝑒𝑟 𝑞𝑢𝑎𝑟𝑡𝑒𝑟)𝑁 − 1
12 | P a g e
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 𝑝𝑒𝑟 𝑠𝑒𝑚𝑖 𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑒𝑟𝑖𝑜𝑑 = (1.02)2 − 1
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 𝑝𝑒𝑟 𝑠𝑒𝑚𝑖 𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑒𝑟𝑖𝑜𝑑 = 4.04%
[1 − (1 + 𝑟)−𝑛 ] 𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒

𝑟 (1 + 𝑟)𝑛
[1 − (1.0404)−16 ] 10,000
𝑃𝑟𝑖𝑐𝑒 = 350 ∗ +
0.0404 1.040416
𝑃𝑟𝑖𝑐𝑒 = 4066.30 + 5306.33
𝑷𝒓𝒊𝒄𝒆 = 𝑷𝟗𝟑𝟕𝟐. 𝟔𝟑
Answer: P9372.63
20. ECE Board Exam April 1995 and April 2000

A man wants to make 14% nominal interest compounded semi-annually on a bond investment. How
should the man be willing to pay now for a 12%- P10,000.00 bond that will mature in 10 years and
pays interest semi-annually.
SOLUTION:
12%
𝐶𝑜𝑢𝑝𝑜𝑛 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 = ∗ 10000 = 600 𝑝𝑎𝑖𝑑 𝑠𝑒𝑚𝑖 𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦
2
𝑡 = 10 ∗ 2 = 20 𝑠𝑒𝑚𝑖𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑒𝑟𝑖𝑜𝑑
14%
𝑖= = 7% 𝑝𝑒𝑟 𝑠𝑒𝑚𝑖𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑒𝑟𝑖𝑜𝑑
2
𝑃 𝑃
𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑏𝑜𝑛𝑑 = 600 ∗ ( , 7%. 20) + 10,000 ∗ ( , 7%. 20)
𝐴 𝐹
𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑏𝑜𝑛𝑑 = 600 ∗ 10.594014 + 10,000 ∗ 0.258419
𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝒗𝒂𝒍𝒖𝒆 𝒐𝒇 𝒃𝒐𝒏𝒅 = 𝟖𝟗𝟒𝟎. 𝟔𝟎
Answer: P8940.60
13 | P a g e
21. A P5000.00 debenture bond that matures in 10 years pays P150.00 every three months. If an
investor who bought the bond computed a nominal return of 10% compounded quarterly,
determine a) the bond rate; b) the bond’s purchase price.
SOLUTION:
𝐴𝑛𝑛𝑢𝑎𝑙 𝑐𝑜𝑢𝑝𝑜𝑛 = 150 ∗ 4 = 300
𝐴𝑛𝑛𝑢𝑎𝑙 𝑐𝑜𝑢𝑝𝑜𝑛
𝐵𝑜𝑛𝑑 𝑟𝑎𝑡𝑒 = ∗ 100
𝑓𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒
300
𝐵𝑜𝑛𝑑 𝑟𝑎𝑡𝑒 = ∗ 100
5000
𝑩𝒐𝒏𝒅 𝒓𝒂𝒕𝒆 = 𝟏𝟐%
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑝𝑒𝑟𝑖𝑜𝑑𝑠 = 10 ∗ 4 = 4
𝐴𝑛𝑛𝑢𝑎𝑙 𝑦𝑖𝑒𝑙𝑑 𝑡𝑜 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦 10%

𝑆𝑒𝑚𝑖 𝑎𝑛𝑛𝑢𝑎𝑙 𝑟𝑎𝑡𝑒 = = = 2.5%
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑜𝑢𝑝𝑜𝑛𝑠 𝑖𝑛 𝑎 𝑦𝑒𝑎𝑟 4
𝐴𝑛𝑛𝑢𝑎𝑙 𝑦𝑖𝑒𝑙𝑑 𝑡𝑜 𝑚𝑎𝑡𝑢𝑟𝑖𝑡𝑦 10%

𝑃𝑟𝑖𝑐𝑒 𝑜𝑓 𝑏𝑜𝑛𝑑 = = = 2.5%
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑜𝑢𝑝𝑜𝑛𝑠 𝑖𝑛 𝑎 𝑦𝑒𝑎𝑟 4
[1 − 1]
(1 + 𝑟)𝑛 𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒
𝑟 (1 + 𝑟)𝑛
[1 − 1]
(1 + 0.025)40 51000
𝑃𝑟𝑖𝑐𝑒 = 150 ∗ +
0.025 (1 + 0.025)40
1 − 0.37243
𝑃𝑟𝑖𝑐𝑒 = 150 ∗ + 1.862.15132
0.025
𝑃𝑟𝑖𝑐𝑒 = 150 ∗ 25.10278 + 1.862.15132
𝑷𝒓𝒊𝒄𝒆 = 𝑷𝟓, 𝟔𝟐𝟕. 𝟓𝟕
Answer: 12%; P5627.57
14 | P a g e
22. EE Board Exam October 2001
A bond with a par value of P1000.00 will mature in 7 years with a bond rate of 8% payable annually.
It is to be redeemed at par at the end of this period. If it is sold at P1050.00, determine the yield at
this price.
SOLUTION:
𝐶𝑜𝑢𝑝𝑜𝑛 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 = 8% ∗ 1000 = 80
𝑡𝑖𝑚𝑒 𝑝𝑒𝑟𝑖𝑜𝑑 = 7 𝑦𝑒𝑎𝑟𝑠
𝑝𝑎𝑟 𝑣𝑎𝑙𝑢𝑒 = 1000
𝑝𝑟𝑖𝑐𝑒 = 1050
𝑦𝑖𝑒𝑙𝑑 = 𝑟
80 80 80 80 80 80 80 1000
1050 = + 2
+ 3
+ 4
+ 5
+ 6
+ 7
+
1 + 𝑟 (1 + 𝑟) (1 + 𝑟) (1 + 𝑟) (1 + 𝑟) (1 + 𝑟) (1 + 𝑟) (1 + 𝑟)7
𝒓 = 𝟕. 𝟎𝟕%
Answer: 7.07%
23. To raise capital for an expansion project, Pegasus Motors Corporation issued P5000.00, 8%
bonds. The bonds will mature in 15 years with interest paid every three months. If an investor
purchased 12 certificates for P48,000.00. Determine: a0 the total quarterly receipts due; b) the
current yield of the bond.
SOLUTION:
𝐴𝑛𝑛𝑢𝑎𝑙 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒 𝑜𝑛 𝑏𝑜𝑛𝑑 = 8%
8%
𝑄𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑟𝑎𝑡𝑒 = = 2%
4
𝑇𝑜𝑡𝑎𝑙 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑟𝑒𝑐𝑒𝑖𝑝𝑡𝑠 𝑑𝑢𝑒 = 𝑁𝑜. 𝑜𝑓 𝑐𝑒𝑟𝑡𝑖𝑓𝑖𝑐𝑎𝑡𝑒 ∗ 𝐼𝑠𝑠𝑢𝑒 𝑝𝑟𝑖𝑐𝑒 ∗ 𝑄𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑟𝑎𝑡𝑒
𝑇𝑜𝑡𝑎𝑙 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑟𝑒𝑐𝑒𝑖𝑝𝑡𝑠 𝑑𝑢𝑒 = 12 ∗ 5000 ∗ 2%
𝑇𝑜𝑡𝑎𝑙 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑟𝑒𝑐𝑒𝑖𝑝𝑡𝑠 𝑑𝑢𝑒 = 𝑃1,200.00
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝑎𝑛𝑛𝑢𝑚

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑖𝑒𝑙𝑑 = ∗ 100
𝐶𝑜𝑠𝑡 𝑡𝑜 𝐼𝑛𝑣𝑒𝑠𝑡𝑜𝑟
15 | P a g e
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝑎𝑛𝑛𝑢𝑚 = 𝑄𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑟𝑒𝑐𝑒𝑖𝑝𝑡𝑠 ∗ 4
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝑎𝑛𝑛𝑢𝑚 = 𝑃1,200 ∗ 4
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑒𝑟 𝑎𝑛𝑛𝑢𝑚 = 𝑃4,800
𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 𝑡𝑜 𝑖𝑛𝑣𝑒𝑠𝑡𝑜𝑟 = 𝑃48,000
𝑃4,800
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑖𝑒𝑙𝑑 = ∗ 100
𝑃48,000
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒚𝒊𝒆𝒍𝒅 = 𝟏𝟎%
Answer: P1200.00; 10%
24. A P10,000.00 bond that pays P300.00 quarterly matures in five years. Determine the discount or
premium to be offered an investor who desires a yield of 14% to maturity.
SOLUTION:
𝐹𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 (𝐹) = 𝑃10,000
𝐶𝑜𝑢𝑝𝑜𝑛 (𝐶) = 𝑃300 𝑝𝑒𝑟 𝑞𝑢𝑎𝑟𝑡𝑒𝑟
𝑛 = 5 𝑦𝑒𝑎𝑟𝑠 = 20 𝑞𝑢𝑎𝑟𝑡𝑒𝑟
𝑌𝑇𝑀 = 14% 𝑝𝑒𝑟 𝑎𝑛𝑛𝑢𝑚
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 = 14% = (1 + 𝑟)4 − 1
𝑟 = 3.33%
𝐶[1−(1 + 𝑟)−𝑛 ]
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = + 𝐹(1 + 𝑟)−𝑛
𝑟
300[1−(1.0333)−20 ]
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = + 10000(1.0333)−20
0.0333
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = 𝑃9523.70
𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒 − 𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒
𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝑃10,000 − 𝑃9523.70
𝑫𝒊𝒔𝒄𝒐𝒖𝒏𝒕 = 𝑷𝟒𝟕𝟔. 𝟑𝟎
Answer: Bd=P476.30
16 | P a g e
25. A P10,000.00, 8 years, 7% bond that pays interest semi-annually is offered at 5% discount.
Determine its redemption price if an investor is to realize a yield of 10% semi-annually.
SOLUTION:
𝐹𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 = 𝑃10,000.00
𝐷𝑢𝑟𝑎𝑡𝑖𝑜𝑛(𝑛) = 8 𝑦𝑒𝑎𝑟𝑠 = 16 𝑠𝑒𝑚𝑖𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑒𝑟𝑖𝑜𝑑𝑠
𝑌𝑇𝑀(𝑟) = 10% 𝑝𝑒𝑟 𝑎𝑛𝑛𝑢𝑚 = 5% 𝑝𝑒𝑟 𝑠𝑒𝑚𝑖𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑒𝑟𝑖𝑜𝑑
7% 𝑜𝑓 10,000
𝐶𝑜𝑢𝑝𝑜𝑛(𝐶) = = 𝑃350
2
𝐿𝑒𝑡 𝑡ℎ𝑒 𝑟𝑒𝑑𝑒𝑚𝑝𝑡𝑖𝑜𝑛 𝑣𝑎𝑙𝑢𝑒 = 𝑅
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = 𝐹𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 − 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = 95% 𝑜𝑓 𝑓𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 = 𝑃9500
𝐶[1 − (1 + 𝑟)−𝑛 ]
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = + 𝑅(1 + 𝑟)−𝑛
𝑟
350[1 − (1.05)−16 ]
9500 = + 𝑅(1.05)−16
0.05
𝑅(1.05)−16 = 5706.7807
𝑹 = 𝑷𝟏𝟐, 𝟒𝟓𝟕. 𝟏𝟗
Answer: P12,457.19
26. A very stable and solvent company issued P10,000.00, 8% debenture bonds for P10,700.00. If
the bond pays interest yearly and will mature in 10 years, determine: a) the current yield; b) the
yield to maturity.
Answer: 7.48%; 7%
17 | P a g e
27. A P10,000.00,6-year, 12% bond is offered with a premium of P80.00. If interest is payable semi-
annually, determine a) the current yield; b) the yield to maturity.
SOLUTION:
𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒 (𝐹) = 𝑃1000
𝑇ℎ𝑒 𝑏𝑜𝑛𝑑 𝑝𝑎𝑦𝑠 𝑠𝑒𝑚𝑖𝑎𝑛𝑛𝑢𝑎𝑙 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑛 = 6 𝑦𝑒𝑎𝑟𝑠 = 12 𝑝𝑒𝑟𝑖𝑜𝑑𝑠
12% 𝑜𝑓 1000
𝐶𝑜𝑢𝑝𝑜𝑛(𝐶) = = 𝑃60
2
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = 𝐹𝑎𝑐𝑒 𝑣𝑎𝑙𝑢𝑒 + 𝑃𝑟𝑒𝑚𝑖𝑢𝑚 = 𝑃1,080
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑖𝑒𝑙𝑑 =
𝐵𝑜𝑛𝑑 𝑃𝑟𝑖𝑐𝑒
(2 ∗ 60)
1080
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒚𝒊𝒆𝒍𝒅 = 𝟏𝟏. 𝟏𝟏%
𝐿𝑒𝑡 𝑡ℎ𝑒 𝑌𝑇𝑀 = 𝑟 𝑠𝑒𝑚𝑖𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦
𝐶[1 − (1 + 𝑟)−𝑛 ]
𝑟
60[1 − (1 + 𝑟)−12 ]
1080 = + 1000(1 + 𝑟)−12
𝑟
𝑟 = 5.0925% 𝑠𝑒𝑚𝑖𝑎𝑛𝑛𝑢𝑎𝑙𝑙𝑦
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑌𝑇𝑀 = (1 + 𝑟)2 − 1
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑌𝑇𝑀 = (1.050925)2 − 1
𝑬𝒇𝒇𝒆𝒄𝒕𝒊𝒗𝒆 𝒀𝑻𝑴 = 𝟏𝟎. 𝟒𝟒%
Answer: 11.11%; 10.44%
18 | P a g e
28. A P10,000.00, 5-year, 10% bond is offered with a discount of P250.00. If the bond pays interest
quarterly, find a) the current yield; b) the yield to maturity.
SOLUTION:
𝐷𝑢𝑟𝑎𝑡𝑖𝑜𝑛(𝑛) = 5 𝑦𝑒𝑎𝑟𝑠 = 20 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑠
𝐶𝑜𝑢𝑝𝑜𝑛 𝑟𝑎𝑡𝑒 = 10%
10% 𝑜𝑓 10000
𝑄𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑐𝑜𝑢𝑝𝑜𝑛(𝐶) = = 𝑃250
4
𝐿𝑒𝑡 𝑟 = 𝑄𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑌𝑇𝑀
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑏𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = 𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒 − 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑏𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = 𝑃10,000 − 𝑃250
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑏𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = 𝑃9750
𝐴𝑛𝑛𝑢𝑎𝑙 𝑐𝑜𝑢𝑝𝑜𝑛 = 4 ∗ 𝑄𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑐𝑜𝑢𝑝𝑜𝑛 = 𝑃1000
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑏𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒
𝑃1000
𝑃9750
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒚𝒊𝒆𝒍𝒅 = 𝟏𝟎. 𝟐𝟔%
𝐶[1 − (1 + 𝑟)−𝑛 ]
𝑟
250[1 − (1 + 𝑟)−20 ]
9750 = + 10000(1 + 𝑟)−20
𝑟
𝑟 = 2.663%
𝑌𝑇𝑀 = 𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒
𝑌𝑇𝑀 = (1 + 𝑄𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑟𝑎𝑡𝑒)4 − 1
𝑌𝑇𝑀 = (1.02663)4 − 1
𝒀𝑻𝑴 = 𝟏𝟏. 𝟎𝟕%
Answer: 10.26%; 11.07%
19 | P a g e
29. A P5000.00, 10-year, 8% bond that pays interest annually was purchased four years ago with a
discount of P152.00. If the bond is sold today for P4750.00, determine a) the rate of return
realized by the owner; b) the rate of return realized by the purchaser if he holds on to the bond
until maturity.
Answer: 7.8%; 9.1%
30. EE Board Exam October 1986
A P1 000 000.00 issue of 3%, 15-year bonds are sold at 95%. The miscellaneous initial expense of the
financing was P20,000.00 and yearly expenses of P2000.00 is incurred. What is the true cost the
company is paying for the money it borrowed?
Answer: 3.8%
31. Ruby Corporation is offering P10,000.00, 8% bonds that pays interest quarterly for P8500.00.
Jade Corporation is offering P10,000.00, 12% bonds that pay interest semi-annually at face
value. If both bond offerings will mature in five years, determine the better offer.
SOLUTION:
𝑅𝑢𝑏𝑦 𝐶𝑜𝑟𝑝𝑜𝑟𝑎𝑡𝑖𝑜𝑛:
8% 𝑜𝑓 10000
𝐶𝑜𝑢𝑝𝑜𝑛 = = 𝑃200
4
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = 𝑃8500
𝑛 = 5 𝑦𝑒𝑎𝑟𝑠 = 20 𝑞𝑢𝑎𝑟𝑡𝑒𝑟𝑠
𝐿𝑒𝑡 𝑟 = 𝑄𝑢𝑎𝑟𝑡𝑒𝑟𝑙𝑦 𝑌𝑇𝑀
𝐽𝑎𝑑𝑒 𝐶𝑜𝑟𝑝𝑜𝑟𝑎𝑡𝑖𝑜𝑛:
12% 𝑜𝑓 10000
𝐶𝑜𝑢𝑝𝑜𝑛 = = 𝑃600
2
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = 𝑃10000
𝑛 = 5 𝑦𝑒𝑎𝑟𝑠 = 10 𝑝𝑒𝑟𝑖𝑜𝑑𝑠
20 | P a g e
𝐿𝑒𝑡 𝑟 = 𝑆𝑒𝑚𝑖𝑎𝑛𝑛𝑢𝑎𝑙 𝑌𝑇𝑀
𝐶𝑜𝑢𝑝𝑜𝑛[1 − (1 + 𝑟)−𝑛 ]
𝐵𝑜𝑛𝑑 𝑝𝑟𝑖𝑐𝑒 = + 𝐹𝑎𝑐𝑒 𝑉𝑎𝑙𝑢𝑒(1 + 𝑟)−𝑛
𝑟
𝐹𝑜𝑟 𝑅𝑢𝑏𝑦 𝐶𝑜𝑟𝑝𝑜𝑟𝑎𝑡𝑖𝑜𝑛:
200[1 − (1 + 𝑟)−20 ]
8500 = + 10000(1 + 𝑟)−20
𝑟
𝑟 = 3.009%
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑣𝑒 𝑎𝑛𝑛𝑢𝑎𝑙 𝑌𝑇𝑀 = (1 + 𝑟)4 − 1
𝑬𝒇𝒇𝒆𝒄𝒕𝒊𝒗𝒗𝒆 𝒂𝒏𝒏𝒖𝒂𝒍 𝒀𝑻𝑴 = 𝟏𝟐. 𝟔𝟎%
𝐹𝑜𝑟 𝐽𝑎𝑑𝑒 𝐶𝑜𝑟𝑝𝑜𝑟𝑎𝑡𝑖𝑜𝑛:
600[1 − (1 + 𝑟)−10 ]
10000 = + 10000(1 + 𝑟)−10
𝑟
𝑟 = 6%
𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑣𝑒 𝑎𝑛𝑛𝑢𝑎𝑙 𝑌𝑇𝑀 = (1 + 𝑟)2 − 1
𝑬𝒇𝒇𝒆𝒄𝒕𝒊𝒗𝒗𝒆 𝒂𝒏𝒏𝒖𝒂𝒍 𝒀𝑻𝑴 = 𝟏𝟐. 𝟑𝟔%
Answer: ieR=12.6%, ieJ=12.36%
21 | P a g e
22 | P a g e

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UNIVERSITY OF THE EAST -CALOOCAN

Civil Engineering Department

Stocks and Bonds

Julie Ann Zafra

Engr. Reyman Solas

𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 = 0.0085

𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 ∗ 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑎𝑡𝑒

𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 = 𝑃500 ∗ 10%

𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 = 𝑃50

𝐹𝑙𝑜𝑎𝑡𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑃𝑟𝑖𝑐𝑒 ∗ 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒

𝐹𝑙𝑜𝑎𝑡𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 = 𝑃500 ∗ 7.5%

𝐹𝑙𝑜𝑎𝑡𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡 = 𝑃37.50

𝐶𝑜𝑠𝑡 𝑜𝑓 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 = 0.1081081081

𝑪𝒐𝒔𝒕 𝒐𝒇 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 = 𝟏𝟎. 𝟖𝟏%

𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝒔𝒕𝒐𝒄𝒌 = 𝑷𝟒𝟎𝟎. 𝟎𝟎

𝐴𝑚𝑜𝑢𝑛𝑡 𝑝𝑟𝑒𝑑𝑒𝑟𝑟𝑒𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑

𝑪𝒐𝒔𝒕 𝒑𝒓𝒆𝒇𝒆𝒓𝒓𝒆𝒅 𝒔𝒕𝒐𝒄𝒌 = 𝟖%

𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑟𝑎𝑡𝑒 − 0.05 = 0.05

𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑟𝑎𝑡𝑒 = 0.05 + 0.05

𝑅𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑟𝑎𝑡𝑒 = 0.01

𝑹𝒆𝒒𝒖𝒊𝒓𝒆𝒅 𝒓𝒂𝒕𝒆 = 𝟏𝟎%

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 − 𝐼𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑎𝑚𝑜𝑢𝑛𝑡

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 = 𝑃11.50 − 𝑃1.50

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 = 𝑃10.00

𝐺𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒 = 15.00%

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 𝑎𝑓𝑡𝑒𝑟 3 𝑦𝑒𝑎𝑟 = 𝑃11.50𝑥(1 + 15%)3

𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒑𝒂𝒊𝒅 𝒂𝒇𝒕𝒆𝒓 𝟑 𝒚𝒆𝒂𝒓 = 𝑷𝟏𝟕. 𝟒𝟗

𝑺𝒕𝒐𝒄𝒌 𝑷𝒓𝒊𝒄𝒆 = 𝑷𝟔𝟎

𝐺𝑖𝑣𝑒𝑛 𝑡ℎ𝑒 𝑠𝑡𝑜𝑐𝑘 𝑝𝑟𝑖𝑐𝑒 = 𝑃75

𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 = 15%

𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 𝑎𝑓𝑡𝑒𝑟 𝑜𝑛𝑒 𝑦𝑒𝑎𝑟 = 75(1 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒) 𝑦𝑒𝑎𝑟

𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 𝑎𝑓𝑡𝑒𝑟 𝑜𝑛𝑒 𝑦𝑒𝑎𝑟 = 75(1 + 15%)1

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑎𝑚𝑜𝑢𝑛𝑡 = 0.08𝑥85.25

𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝒂𝒎𝒐𝒖𝒏𝒕 = 𝟔. 𝟖𝟐 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆𝒔

Date Price Dividends Paid

January 24, 2005 P60.00 P5.00

January 24, 2006 P63.00 P5.50

January 24, 2007 P67.00 P6.05

January 24, 2008 P74.00 P7.49

𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠 = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑔𝑎𝑖𝑛𝑠 + 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑

𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠 = 63 − 60 + 5.5

𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠 = 8.5

𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠

𝐹𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛 = 14.17%

𝑆𝑒𝑐𝑜𝑛𝑑 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛𝑠 = 67 − 63 + 6.05

𝑆𝑒𝑐𝑜𝑛𝑑 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛 = 15.95%

𝑇ℎ𝑖𝑟𝑑 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛 = 74 − 67 + 7.4

𝑇ℎ𝑖𝑟𝑑 𝑦𝑒𝑎𝑟 𝑔𝑎𝑖𝑛 = 14.4

𝑇ℎ𝑖𝑟𝑑 𝑦𝑒𝑎𝑟 ′ 𝑠 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 𝑟𝑒𝑡𝑢𝑟𝑛 = 21.49%

𝑓𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛 + 𝑠𝑒𝑐𝑜𝑛𝑑 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑟𝑒𝑡𝑢𝑟𝑛

𝑻𝒘𝒐 𝒚𝒆𝒂𝒓𝒔 𝒉𝒐𝒍𝒅𝒊𝒏𝒈 𝒑𝒆𝒓𝒊𝒐𝒅 𝒓𝒆𝒕𝒖𝒓𝒏 = 𝟏𝟓. 𝟎𝟔%

14.17 + 15.95 + 21.49%

𝑻𝒉𝒓𝒆𝒆 𝒚𝒆𝒂𝒓𝒔 𝒉𝒐𝒍𝒅𝒊𝒏𝒈 𝒑𝒆𝒓𝒊𝒐𝒅 𝒓𝒆𝒕𝒖𝒓𝒏 = 𝟏𝟕. 𝟐𝟎%

𝑇𝑜𝑡𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑 𝑖𝑛 𝑓𝑜𝑢𝑟 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑

𝑇𝑜𝑡𝑎𝑙 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑 𝑖𝑛 𝑓𝑜𝑢𝑟 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 = 𝑃22.04

𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑔𝑎𝑖𝑛 𝑜𝑛 𝑠𝑡𝑜𝑐𝑘

𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑔𝑎𝑖𝑛 𝑜𝑛 𝑠𝑡𝑜𝑐𝑘 = 𝑃62 − 𝑃60

𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑔𝑎𝑖𝑛 𝑜𝑛 𝑠𝑡𝑜𝑐𝑘 = 𝑃2

(𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐺𝑎𝑖𝑛)

𝑅𝑎𝑡𝑒 𝑜𝑓 𝑟𝑒𝑡𝑢𝑟𝑛 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑓𝑜𝑢𝑟 − 𝑦𝑒𝑎𝑟 ℎ𝑜𝑙𝑑𝑖𝑛𝑔 𝑝𝑒𝑟𝑖𝑜𝑑 = 0.1001666667

𝑹𝒂𝒕𝒆 𝒐𝒇 𝒓𝒆𝒕𝒖𝒓𝒏 𝒇𝒐𝒓 𝒕𝒉𝒆 𝒇𝒐𝒖𝒓 − 𝒚𝒆𝒂𝒓 𝒉𝒐𝒍𝒅𝒊𝒏𝒈 𝒑𝒆𝒓𝒊𝒐𝒅 = 𝟏𝟎%

𝐿𝑒𝑡 𝐷𝑛 𝑑𝑒𝑛𝑜𝑡𝑒 𝑡ℎ𝑒 𝑑𝑖𝑣𝑖𝑑𝑒𝑑 𝑖𝑛 𝑦𝑒𝑎𝑟 𝑛.