# UB MGF 401 - MGF301_Assignment_3_-_Revised_(Spring_2011)(1) (2 pages)

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## MGF301_Assignment_3_-_Revised_(Spring_2011)(1)

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- Pages:
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- School:
- University at Buffalo, The State University of New York
- Course:
- Mgf 401 - Financial Institutions

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ASSIGNMENT 3 MGF 301 Corporation Finance Spring 2011 DUE Monday March 28th at 3 30pm EST in Jacobs 365 You may work in a group of up to 4 on this Assignment Please indicate clearly on all submitted Assignments who the members of the group are Please note all assignments submitted with more than 4 group members will automatically receive a 0 grade No late assignments will be accepted You may hand in the assignment in person in Jacobs 365 put it under the door if no one is there or submit it by email to the link in UBLearns before the time it is due Answer all of the following questions For each answer show your work to get full points stating the answer alone is not sufficient 1 One year ago you purchased 500 shares of ABC stock for 30 per share and 500 shares of XYZ stock for 21 per share During the year ABC stock paid a 50 dividend and XYZ did not pay any dividend If the current stock price is 28 for ABC and 23 for XYZ and the inflation rate the last year was 1 answer the following showing all work a Calculate the actual return also called holding period return or percentage return on your total investment over the last year b Calculate i the dividend yield and ii the percentage capital gain on your total investment c Calculate the real rate of return on your total investment 2 You are interested in buying a stock that has a price of 32 You have projected that next year there is a 10 probability the stock will equal 3 a 20 probability the stock will equal 25 a 30 probability the stock will equal 36 a 30 probability the stock will equal 55 and a 10 probability the stock will equal 80 Answer the following showing all work a what is the expected return on the stock if you buy today and sell next year b what is the expected standard deviation of the stock 3 Find two publicly traded stocks in different industries and look up estimates of their a Using Rf 1 E Rm 9 calculate the E r for each stock b Explain in words a non finance student could understand why the one stock has a higher expected return than the other 4 Find an announcement of new information made within a month from today i e earnings announcement merger etc for any publicly traded stock that moves the stock price at least 1 Print out or draw a chart that shows at least 2 days before the event and at least one day after Note make sure you find the first announcement of the information a Using this chart analyze if the evidence is consistent with the semi strong form market efficiency b Is the stock market reaction consistent with the strong form of market efficiency 5 Geothermal corporation issued a press release before the stock market opened announcing that its earnings have decreased by 30 over the last year earnings Explain how each of the following individual scenarios could be consistent with the semi strong form of market efficiency a When trading opened after the announcement and throughout the first day there was no stock price change after the company announced the 30 decrease in earnings b The stock price of Geothermal decreased slowly over the 30 days before the announcement of the 30 decrease in earnings c The stock price decreased by 10 immediately following the announcement but then increased throughout the day so that the closing price was only 2 below the previous day

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