Question 1: Cite recent illustrations of political, social or economic events (market risk) which have excited:
a) The stock market
b) Stocks in a specific industry, to surge ahead or plummet sharply.
Question 2: What is the importance of a characteristic line which consists of a negative slope?
Question 3: The shares of Sumit Ltd. were purchased for Rs. 50 on January 1. The stock paid dividends totaling Rs. 2 throughout ensuing year. At year-end, the stock was sold for Rs. 45. Determine the total return on Sumit stock for the year?
Question 4: Consult Value Line, Moody’s, Standard and Poor’s or other investment services to find out price and dividend data for Pepsi Co and Tootsie Roll Industries. If you had purchased each stock at the average of its high and low prices in 1990 and sold each stock at the average of its high and low prices in the year1994, determine the rate of return would you have earned on each stock (before transactions costs and taxes)? Suppose that dividends paid each year are collected in one payment at the end of the year.
Question 4: Stocks A and B do not pay dividends. Stock A presently sells for Rs. 50 and B for Rs. 100. At the end of the year ahead there is a fifty-fifty chance that A will sell for either Rs. 61 or Rs. 57 and B for either Rs. 117 or Rs. 113. Determine the stock, A or B, would you choose to purchase now? Explain why?