1- You find that the bid and ask prices for a stock are $10.25 and $10.30, respectively. If you purchase or sell the stock, you must pay a flat commission of $25. If you buy 100 shares of the stock and immediately sell them, what is your total implied and actual transaction cost in dollars?Show your work

A.

$50

B.

$25

C.

$30

D.

$55

2- You short-sell 200 shares of Tuckerton Trading Co., now selling for $50 per share. What is your maximum possible loss?Show your work

A.

$50

B.

$150

C.

$10,000

D.

Unlimited

3- Assume you purchased 500 shares of XYZ common stock on margin at $40 per share from your broker. If the initial margin is 60%, the amount you borrowed from the broker is _________.Show your work

A.

$20,000

B.

$12,000

C.

$8,000

D.

$15,000

4- You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $50 per share. If you want to limit your loss to $2,500, you should place a stop-buy order at ____.Show your work

A.

$37.50

B.

$62.50

C.

$56.25

D.

$59.75

5- You sell short 200 shares of Doggie Treats Inc. that are currently selling at $25 per share. You post the 50% margin required on the short sale. If your broker requires a 30% maintenance margin, at what stock price will you get a margin call? (You earn no interest on the funds in your margin account, and the firm does not pay any dividends.)Show your work

A.

$28.85

B.

$35.71

C.

$31.50

D.

$32.25

6- You purchased 200 shares of ABC common stock on margin at $50 per share. Assume the initial margin is 50% and the maintenance margin is 30%. You will get a margin call if the stock drops below ________. (Assume the stock pays no dividends, and ignore interest on the margin loan.)Show your work

A.

$26.55

B.

$35.71

C.

$28.95

D.

$30.77