1. An investor buys 2 round lot shares of Lenovo at $62 per share on margin. The initial margin requirement is 70%, and the maintenance margin is 30%. The investor can borrow at the rate of 7% annually. Lenovo pays dividend of $0.53 per quarter. The investor expects to sell the shares after nine months later at a price of 15% higher than buying price. (a) What is the actual margin if the price drops to $51? (b) Calculate the margin call price. (c) What is the actual margin if the price drops to $37? (d) If the investor had to recover from margin call how many shares he or she needs to sell. (e) If the investor had to recover from margin call how much cash he or she needs to deposit. (f) If the investor needs to recover from margin call how much debt, he or she needs to repaid. (g) Calculate the total dividend and interest amount. (h) What is the return on invested capital for this investor after nine months? What is the annual return?

2. A bond with a face value of a $1000, 10% coupon bond with 7 years to maturity if the YTM is 12% annually. (a) Calculate the bond price. (b) Calculate the duration. (c) Calculate the current yield of the bond. (d) Calculate the percentage change in the price of the bond if YTM increases by 1%. (e) Find the effective duration of this bond if a 30 basis point change in yield.