Question
1. An analyst gathers the following information for an index comprised of assets A, B, and C. An analyst gathers the following information for a
1. An analyst gathers the following information for an index comprised of assets A, B, and C. An analyst gathers the following information for a market-capitalization-weighted index comprised of securities A, B, and C. The total return of the index is:
Security | BOP Price | EOP Price | Quantity of Shares | Dividend |
A | 10 | 15 | 100 | 1 |
B | 30 | 31 | 300 | 1.2 |
C | 20 | 15 | 200 | 0.5 |
2.
An investor buys a stock on margin. Assume that the interest on the loan and the dividend are both paid at the end of the holding period. The data related to the transaction are as follows:
Number of shares | 500 |
Purchase price per share | $20 |
Initial Margin | 40% |
Commission | $10 on purchase, $10 on sales |
Sale price per share | $24 |
Call money rate | 5% |
Dividend | $0.40 / share |
The investors total return on this investment over the margin holding period is closest to:
3. What would an investor be willing to pay for a share of preferred stock that pays an annual $7 dividend if the required return is 7.75%?
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