1. Stock XYZ is currently trading at $35.48. You want to enter the market at $33. All of the following orders can be used EXCEPT (1 point):

• Stop buy
• Stop sell
• Market
• Limit sell

2. Oak Street Health went public on August 6, 2020 with an IPO price of $21 per share. Go to Yahoo Finance, obtain the closing price on its first trading day and calculate the IPO underpricing (1 point):

• 149.5%
• 190.5%
• 90.5%
• 49.5%

3. You want to short sell 1000 stocks of company Y. You borrow the shares and sell them at $25 per share in January. In February, stock price decreased to $23.50, and in March stock price increased to $26.50. Calculate your rate of return if you close transaction in February (1 point):

• 6.0%
• -6.0%
• 5.4%
• 7.2%

4. You want to short sell 1000 stocks of company Y. You borrow the shares and sell them at $25 per share in January. In February, stock price decreased to $23.50, and in March stock price increased to $26.50. Calculate your rate of return if you close transaction in March (1 point):

• 6.0%
• -5.4%
• -7.2%
• -6.0%

5. You want to purchase $50,000 worth of Y stock which is currently trading at $17 per share, using your margin account. If the initial margin is 45% and maintenance margin is 30%, at what price will you receive a margin call (1 point)?

• $13.1
• $15.9
• $10.9
• $11.9

6. You purchased 10,000 shares of Y stock at $55 per share on margin. Assume that initial margin is 50% and margin interest rate is 7%. If you sell the shares two years later for $67 per share, calculate your return using margin (1 point):

• 50.0%
• 36.6%
• 21.8%
• 43.6%

7. Spotify went public on April 3, 2018 on NYSE through a direct listing procedure, rather than a standard IPO. In direct listing a stock starts trading on an exchange without a formal offering. IPO price is determined by buy and sell orders submitted by market participants before the first day. Some of direct listing advantages include lower costs of going public (no underwriters) and process transparency which is good for both buyers and seller of stock. Please discuss disadvantages of going public through a direct listing (4 points).

8. 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? (1 point)

• 33%
• 24%
• 28%
• 15%

9. Consider a 4.0% coupon seven year T-note with a par of $1,000 which pays interest semiannually. The maximum number of STRIPS this T-note could be stripped into is _____ (1 point):

• 8
• 7
• 11
• 15

10. You purchased a convertible bond tree years ago. It has a 7.5% coupon rate, par value of $1,000, interest is paid semiannually, and the bond matures in 6 years. If the bond is convertible at $31.25 per share, calculate conversion ratio (1 point):

• 25
• 32
• 31
• 35

11. You purchased a convertible bond tree years ago. It has a 7.5% coupon rate, par value of $1,000, interest is paid semiannually, and the bond matures in 6 years. If the firm stock currently trades at $41.50 per share, calculate conversion value (1 point):

• $1286
• $1000
• $1328
• $957

12. You purchased a convertible bond tree years ago. It has a 7.5% coupon rate, par value of $1,000, interest is paid semiannually, and the bond matures in 6 years. If the bond currently trades at $1,125 and firm stock currently trades at $41.50 per share, calculate conversion premium (1 point):

• -15.3%
• 15.3%
• 12.5%
• -7.5%

13. Consider a preferred stock that currently pays $2.25 annual dividend. The current interest rate in the market is 5.6%. How does a preferred stock price change if the interest rate increases to 6.3%? (1 point)

• increases by $4.5
• increases by $0.70
• decreases by $4.5
• decreases by $5.6

14. For which of the following investors would zero-coupon bonds be MOST appropriate? (1 point)

• John, age 25, graduate student living on stipend
• Anabelle, age 34, aggressive risk tolerance, has a stable job
• Peter and Mary, parents of Rosa who will need $50,000 for college tuition in 4 years
• Catherine, age 65, retired but in need of fixed cash flows in addition to her retirement benefits

15. Company XYZ issued a ten-year corporate bond three years ago. The bond has 8% coupon rate, par value of $1,000 and pays interest semiannually. If the current interest rate is 6.5%, should XYZ call the bond? (1 point)

• No because it is an extremely attractive investment compared to other corporate bonds
• No because if XYZ issues a new bond, investors will be greatly exposed to financial risk
• Yes because it decreases investors exposure to reinvestment risk
• Yes because it can decrease payments if XYZ calls the bond and issues a new one

16. Go to the Federal Reserve website and obtain daily yields for November 1, 1999. The yield for securities with ten years till maturity equals ____ (1 point):

• 6.06%
• 6.55%
• 4.57%
• 3.12%

17. On November 1, 1999 the yield curve share could be described as _____ (1 point):

• normal because long-term interest rates are lower than mid-term interest rates
• normal because interest rates are positively related to maturities
• flat because most interest rates remain similar

inverted because interest rates decrease with mature