FIN 587

Problem 1 You purchased 1,000 shares of the New Fund at a price of $20 per share at the beginning of the year. You paid a front-end load of 4.25%. The securities in which the fund invests increase in value by 16.75% during the year. The fund’s expense ratio is 1.20%. What is your rate of return on the fund if you sell your shares at the end of the year? Problem 2 The stock of Business Adventures sells for $40 a share. Its likely dividend payout and end-of-year price depend on the state of the economy by the end of the year as follows: Dividend Stock Price Boom $2.50 $50 Normal economy $1.00 $43 Recession $0.75 $34 Calculate the expected holding-period return and standard deviation of the holding-period return. All three scenarios are equally likely

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