1. An investor is in a 30% combined federal plus state tax bracket. If corporate bonds offer 9.50% yields, what yield must municipals offer for the investor to prefer them to corporate

2. Find the equivalent taxable yield of the municipal bond for tax brackets of zero, 10%, 20%, and 30%, if it offers a yield of 4.50%.

3. Explain how we calculate the rate of return for a market-value weighted index. You can show the formula and explain it.

4. Explain how we calculate the rate of return for an equally-weighted index. You can show the formula and explain it.

5. A T-bill with face value $10,000 and 94 days to maturity is selling at a bank discount ask yield of 4.1%. (Use 360 days)

6. Which security should sell at a greater price? An 8-year Treasury bond with an 8.75% coupon rate or an 8-year T-bond with a 7.75% coupon.

7. Which security should sell at a greater price? A put option on a stock selling at $55 or a put option on another stock selling at $45. (All other relevant features of the stocks and options are assumed to be identical.)

8. Suppose you buy one contract for May 2017 delivery at the closing price. If the contract closes in May at a price of $3.68 per bushel, what will be your profit or loss? (Each contract calls for delivery of 5,000 bushels.) The May price as of now (closing is $3.6125). Remember: (Price paid for the futures contract price at maturity date) * (number of bushels)

9. Find the after-tax return to a corporation that buys a share of preferred stock at $39, sells it at year-end at $39, and receives a $3 year-end dividend. The firm is in the 30% tax bracket.

10. Which of the following correctly describes a repurchase agreement?

a.) The sale of a security with a commitment to repurchase the same security at a specified future date and a designated price. b.) The sale of a security with a commitment to repurchase the same security at a future date left unspecified, at a designated price. c.) The purchase of a security with a commitment to purchase more of the same security at a specified future date.