Workshop 3 Questions

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Finance 261 Workshop 3
Questions
1. (Final exam 2nd semester 2005) In the following table P0 represents share price at time zero (t=0) and P1 represents share price at time (t=1).
	Company
	P0
	Number of shares on issue at t=0
	P1
	Adjusted prices
	X
	$3.75
	800
	$5.10
	5.10
	Y
	$8.40
	1125
	$4.50 ex-split
	4.50*2=9.00
	Z
	$6.00
	950
	$5.15 ex-div
	5.15+0.25=5.40
A value weighted gross share price index is formed from companies X, Y, and Z. The index is constructed using free float shares. The level of the index at time zero was 3000. During period t=0 to t=1 company Y made a 2:1 share split and company Z paid a dividend of 25 cents per share. Company X has 60% of its shares owned by a strategic shareholder. These shares are not available for trading. Companies X and Z made no change to the number of shares on issue during the period. 
Based on the above information calculate the level of the share price index at t=1. 
2. (Mid-term Test 2015FC) A New Zealand investor purchased 300 shares of MTSF Company, a US company listed on the NASDAQ, at 40 USD per share one year ago when the exchange rate was 0.75 USD / 1 NZD. MTSF Company did not pay any dividends over the year and is currently trading at 44 USD per share. The current exchange rate is 0.80 USD / 1 NZD. What is the NZD denominated annual rate of return on the investment? 
A. 17.33%
B. 12.24%
C. 3.13%
D. -3.03%
3. (Final exam 1st semester 2006) Assume you purchased 50 shares in X, a German share traded on the Frankfurt Stock Exchange, for €35 per share when the exchange rate was €0.5018/$1NZD. Today, exactly one year later, shares of stock X are trading at €38 per share and paid a dividend of €1 per share. The year-end exchange rate is €0.5620/$1NZD.
a) Did the euro depreciate or appreciate relative to the New Zealand dollar over the year?
b) What was the cost to you in terms of NZDs of buying 50 X shares one year ago?
c) What was your percent discrete holding period return on the shares over the year stated in terms of NZDs?
4. (Final exam 1st semester 2005) ABC Corporation’s monthly share prices are listed below together with a description of events occurring during the month which may affect the market price of the company’s shares. The closing market price at the start of month 1 is $3.00.
	End of month
	Closing market price
	Event
	(start of month 1)
	$3.00
	
	1
	
$2.85
	1 for 4 rights issue at a subscription price of $1.50
	2
	
$1.35
	Share split, such that the number of shares on issue doubles
	3
	$1.50
	1 for 5 bonus issue
All closing share prices are “ex” the corresponding event in column three. All events occurred immediately before the end of the relevant month. 
a) What is the % return from the start of month 1 to the end of month 1?
b) What is the % return from the end of month 1 to the end of month 2?
c) What is % return from the end of month 2 to the end of month 3?
d) What is the geometric mean rate of return from the start of month 1 to the end of month 3 expressed as a percentage per month?
5. (Final exam 1st semester 2009) At the end of each month Delta Corporation’s share price was obtained from the stock exchange. These closing share prices are listed below together with a description of events occurring during the month. The company’s share price at the beginning of month 1 is $3.15. 
	End of month
	Closing share price
	Event
	(start of month 1)
	$3.15
	
	
1
	
$3.20
	1 for 3 rights issue at a subscription price of $2.54
	2
	$2.40
	1 for 6 bonus issue
All closing share prices are “ex” the corresponding event in column three. All events occurred immediately before the end of the relevant month. 
a) What is the discrete holding period return from start of month 1 to the end of month 1?
b) What is the holding period return from end of month 1 to the end of month 2?
c) What is the geometric mean rate of return from the start of month 1 to the end of month 2 expressed as a percentage per month?
6. (Final exam 1st semester 2007) Assume you purchased a share in Company Z for $5.40 on 1 January 2007 intending to hold it for 180 days. A dividend of 50 cents per share was paid 10 days later. At the end of your holding period you sold the share for $6.40. Assume interim cash flows from the share can be reinvested at 15% p.a. and are compounded on a daily basis. What rate of return did you earn over your 180 day holding period?
3