QUESTION 4 4.1 ABC shares have had returns of 8 percent, -13 percent, -7 percent and...

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Finance

QUESTION 4
4.1 ABC shares have had returns of 8 percent, -13 percent, -7percent and 29 percent for four of the last 5 years.
4.1.1 If the average return of the share over this period is 11percent, what was the share’s return for the missing year? (3)
4.1.2 What is the standard deviation of the share’s return?(6)
4.2 The Extreme Reaches Corp. last paid a R1.50 per share annualdividend. The company is planning on paying R3.00, R5.00, R7.50,and R10.00 a share over the next four years, respectively. Afterthat the dividend will be a constant R2.50 per share per year. Whatis the current market price of this share if the market rate ofreturn is 15%? (6)
4.3 Explain what it means for a company to have a current ratioof 0.50. Would the company be better off if the current ratio was1.50? What if it was 15.0? Explain your answers. (5)

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4.1 Ratings (683 Votes)

1 average return sum of all the returnsnumber of observations 11 813729 R55 55 17R5 R5 38 2 standard deviation SQRTSum XAverage return2N1 SQRT811213112711229112381124 2215 3 See Answer

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QUESTION 4 4.1 ABC shares have had returns of 8 percent, -13 percent, -7percent and 29 percent for four of the last 5 years.4.1.1 If the average return of the share over this period is 11percent, what was the share’s return for the missing year? (3)4.1.2 What is the standard deviation of the share’s return?(6)4.2 The Extreme Reaches Corp. last paid a R1.50 per share annualdividend. The company is planning on paying R3.00, R5.00, R7.50,and R10.00 a share over the next four years, respectively. Afterthat the dividend will be a constant R2.50 per share per year. Whatis the current market price of this share if the market rate ofreturn is 15%? (6)4.3 Explain what it means for a company to have a current ratioof 0.50. Would the company be better off if the current ratio was1.50? What if it was 15.0? Explain your answers. (5)