Reading 35: Return Concepts-LOS a 习题精选 2010, following, discount, concepts, expected

土豆妮

Session 10: Equity Valuation: Valuation Concepts
Reading 35: Return Concepts

LOS a: Distinguish among the following return concepts: holding period return, realized return and expected return, required return, discount rate, the return from convergence of price to intrinsic value (given that price does not equal value), and internal rate of return.

 

 

 

In an efficient market, a mutual fund’s required return is the same as the:

A) holding period return.

B) internal rate of return.

C) net asset value return.

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The internal rate of return (IRR) is the rate that equates the value of the discounted cash flows to the current price of the security. In an efficient market, where securities are properly priced, the IRR and required return are the same.

土豆妮

To determine the present value of an investment based on a future estimate of the investment’s value, an analyst should use the:

A) discount rate.

B) required return.

C) internal rate of return.

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The discount rate is the rate used to find the present value of an investment.

土豆妮

Laura’s Chocolates, Inc. (LC), is a maker of nut-based toffees. The company holds shares in one of its suppliers, and wants to know what the holding period return was last year.

January 1 (purchase date)	$40
December 31	$45
Dividend paid (December 31)	$5
Cost of equity	11%
Cost of debt	8%
Debt : equity	1:3
Tax rate	35%

What is the holding period return?

A) 12.50%.

B) 22.50%.

C) 25.00%.

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