1. Consider the following three stocks:

Stock A $40 200

Stock A $70 500

Stock A $10 600 Assume at these prices that the value-weighted index constructed with the three stocks is 490. What would the index be if stock B is split 2 for 1 and stock C 4 for 1? A) 355 B) 430 C) 1000 D) 490 E) 265

2. In order for you to be indifferent between the after-tax returns on a corporate bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would your tax bracket need to be? A) 15% B) 28% C) 33% D) 72% E) Cannot tell from the information given

3. For a taxpayer in the 25% marginal tax bracket, a 20-year municipal bond currently yielding 5.5% would offer an equivalent taxable yield of A) 5.5%. B) 4.125%. C) 7.33%. D) 10.75%.

4. Assume you sell short 100 shares of common stock at $45 per share, with initial margin at 50%. What would be your rate of return if you repurchase the stock at $40 per share? The stock paid no dividends during the period, and you did not remove any money from the account before making the offsetting transaction. A) 25.67% B) 20.03% C) 22.22% D) 77.46% 5. You sold short 300 shares of common stock at $55 per share. The initial margin is 60%. At what stock price would you receive a margin call if the maintenance margin is 35%? A) $35.22 B) $40.36 C) $65.18 D) $51.00