Question

Given below is hypothetical data on two stocks on the LUSE and the market data (All Lusaka Share Index). The market data already includes dividends paid during the year.

Stock 1 Stock 2 Market Index

Year Stock Price Dividend Stock Price Dividend (Includes Dividends)
2013: K25.88 K1.73 K73.13 K4.50 17,495.97
2012: 22.13 1.59 78.45 4.35 13,178.55
2011: 24.75 1.50 73.13 4.13 13,019.97
2010: 16.13 1.43 85.88 3.75 9,651.05
2009: 17.06 1.35 90.00 3.38 8,403.42
2008: 11.44 1.28 83.63 3.00 7,058.96

Required:
Use Excel for the following questions (The worksheet to be uploaded in Moodle):
Prepare a table presenting the Returns on the three securities for each year (Years, as Rows; Security Names as Columns).

Answer 1

To calculate annual returns, find the price change, add the current year's dividend, and divide by the previous year's stock price. Repeat this for each year and security, presenting the results in a table.

Step-by-step explanation:

To calculate the annual returns for each security, you need to consider the price appreciation (or depreciation) plus any dividends received. The return on a stock consists of the dividend yield and the capital gains or losses from the change in stock price. Below is a step-by-step explanation:

1. Calculate the price change by subtracting the previous year’s stock price from the current year’s stock price.
2. Add the current year’s dividend to the price change.
3. Divide the sum from step 2 by the previous year’s stock price to get the return for the year.
4. Repeat these steps for each security and each year.

After computing the returns, you should organize them into a table with years as rows and security names as columns, presenting the annual returns for each security.