15. ECNs provide several advantages to investors. Which of the following is not an advantage? a. They lower the cost of trading compared to organized exchanges with floor trading b. They let everyone know who is making the trade and at what price c. They provide the ability to trade after hours when the exchanges are closed d. They provide more price transparency than organized exchanges PART II Solve problems for a total of 70 points only. Please show all your work. 1. You purchase 100 shares of a stock at $150 per share on margin of 55 percent. The stock declines to $95. . What is your initial margin position (equity and loan)? b. When the price declines to $95 per share will you be called upon to put up more margin to meet the 35 percent minimum maintenance margin requirement? If yes, how much equity would you need to add to your account? If no, how much equity do you have over the minimum required? c. What is your rate of return (loss)? d. Determine the price that will trigger a margin call. (30 Points) 2. Owen prepared his tax return and estimated that his taxable income was $130,000. What was his tax liability? (use the table below) b. What were his marginal and average tax rates? (20 Points) Tax Rate Taxable income 10% Up to 89,700 12% 59,701 to $39,475 229 539,476 to 584,200 $84.201 to $160,725 S160,726 to 5204,100 35% S204,101 to 5510,300 379 Over S510,300 2. Owen prepared his tax return and estimated that his taxable income was $130,000. .. What was his tax liability? (use the table below) b. What were his marginal and average tax rates? (20 Points) Tax Rate Taxable income 10% Up to 89,700 1296 S9,701 to $39,475 229 $39,476 to 584,200 24% 584,201 to $160,725 $160,726 to S204,100 S204,101 to 5510,300 37% Over 5510,300 Assume the real return in the economy is 2.5 percent. It is anticipated that the consumer price index will go from 251.3 to 254.1. Shares of common stock for the market in general are assumed to have a required rate of return a third higher than the risk-free rate. Calculate the required rate of return on common stock. (10 Points) Assume the following stocks make up a value- weighted index: 30 Corporation Outstanding Ace Gray Compex Zeta Shares Market Price 8.000 12,000 4,000 30,000 4 20 . Calculate the weights assigned to cach stock. Assume the price per share of Compex increases by 4. Assume the following stocks make up a value- weighted index: Corporation Shares Outstanding Market Price Ace 8,000 30 Gray 12,000 4 Compex 4,000 10 Zeta 30,000 20 - Calculate the weights assigned to each stock. b. Assume the price per share of Compex increases by 50 percent, that of Zeta goes down by 10 percent, and the other two stock prices remain constant. What is the value of the new index? Explain why the index followed the pattern it did. (10 Points) 5. Jess is in a 37 percent tax bracket for ordinary income. During the course of the year, she received $72,000 in capital gains on a stock she had held for 13 months, and $90,000 in qualified dividends. How much will her total tax be on this investment-related income? (household income of $650,000) (10 Points) 6
