5. The Arizona Stock Exchange lists a bid price of 1.00 and an ask price of 1.05 for Kicking Bird Energy Corporation.

a.) What is the dealers bid-ask spread?

b.) At what price could you buy the stock for right now?

6. Suppose that you just purchased 250 shares of TTN stock for $70 per share.

If the initial margin requirement is 76.50%, how much money must you borrow?

Hint: (1 initial margin requirement)*(# shares)*(PPS) = borrowing amount.

7. Assume you purchased 500 shares of XYZ common stock on margin at $70 per share from your broker. If the initial margin is 70%, the amount you borrowed from the broker is _________.

8. You short-sell 600 shares of NewCorp Inc., now selling for $30 per share. What is your maximum possible gain, ignoring transactions cost?

Hint: (Maximum possible gain = Proceeds Minimum possible replacement cost)

9. You short-sell 500 shares of NewCorp Inc., now selling for $47 per share. If you want to limit your loss to $2,380, you should place a stop-buy order at ___.

Hint: (Amount received from short sale = # Shares sold short PPS)

(Loss limit = # Shares*(limit loss desired) Amount received from short sale))

10. You sell short 500 shares of Microsoft that are currently selling at $30 per share. You post the 40% margin required on the short sale. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Microsoft is selling at $27? (Ignore any dividends.)

Hint: Rate of return =

(PPS of short sale current PPS) /

(% margin requirement)*( PPS of short sale))