Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Can you help me solve the attached problems? (Can you also include the work required for the first 5 problems so I can get a

image text in transcribed

Can you help me solve the attached problems? (Can you also include the work required for the first 5 problems so I can get a better understanding)

image text in transcribed Question 1 (60 points): 1. The margin requirement on a stock purchase is 25%. You fully use the margin allowed to purchase 100 shares of MSFT at $25. If the price drops to $22, what is your percentage loss? A. 9% B. 15% C. 48% D. 57 2. You sell short 300 shares of Intel which are currently selling at $30 per share. You post the 50% 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 one year if Intel is selling at $27? (Ignore any dividends) A. 10.00% B. 20.00% C. 6.67% D. 15% 3. 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? A. $50 B. $25 C. $30 D. $55 4. An investor buys a T-bill at a bank discount quote of 4.80 with 150 days to maturity. The investor's actual annual rate of return on this investment was _____. A. 4.80% B. 4.97% C. 5.47% D. 5.74% 5. You sell short 200 shares of Doggie Treats Inc.,which 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) A. $28.85 B. $35.71 C. $31.50 D. $32.25 20. Money Market securities are characterized by ________. A.maturities less than one year B. safety of the principal investment C. low rates of return I. A and B II. A and C III. A, B and C 21. If an investor uses the full amount of margin available, the equity in a margin account used for a stock purchase can be found as ________. A. market value of the stock amount owed on the margin loan B. market value of the stock + amount owed on the margin loan C. market value of the stock margin loan D. margin loan x market value of the stock 22. An investor puts up $5,000 but borrows an equal amount of money from their broker to double the amount invested to $10,000. The broker charges 7% on the loan. The stock was originally purchased at $25 per share and in one year the investor sells the stock for $28. The investor's rate of return was ____. A. 17% B. 12% C. 14% D. 19% 23. According to Loughran and Ritter, initial public offerings tend to exhibit __________ performance initially, and __________ performance over the long term. A. bad; good B. bad; bad C. good; good D. good; bad 24. The holding period return (HPR) on a share of stock is equal to A. the capital gain yield during the period, plus the inflation rate. B. the capital gain yield during the period, plus the dividend yield. C. the current yield, plus the dividend yield. D. the dividend yield, plus the risk premium. E. the change in stock price. 25. XYZ stock has the following probability distribution of expected prices one year from now: If you buy XYZ today for $55 and it will pay a dividend during the year of $4 per share, what is your expected holding period return on XYZ? A. 17.72% B. 18.89% C. 17.91% D. 18.18% E. None of the above 26. An investment provides a 1.25% return quarterly, its effective annual rate is A. 5.23%. B. 5.09%. C. 4.02% D. 4.04% E. none of the above 27. Consider the following investments: Which investment would you select if you were risk neutral? A. 1 B. 2 C. 3 D. 4 E. cannot tell from the information given 28. According to the mean-variance criterion, which of the statements below is correct? A. Investment B dominates Investment A. B. Investment B dominates Investment C. C. Investment D dominates all of the other investments. D. Investment D dominates only Investment B. E. Investment C dominates investment A. 29. You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05. What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 0.06? A. 30% and 70% B. 50% and 50% C. 60% and 40% D. 40% and 60% E. cannot be determined 30. The market risk premium is defined as __________. A. the difference between the return on an index fund and the return on Treasury bills B. the difference between the return on a small firm mutual fund and the return on the Standard and Poor's 500 index C. the difference between the return on the risky asset with the lowest returns and the return on Treasury bills D. the difference between the return on the highest yielding asset and the lowest yielding asset 31. The term "complete portfolio" refers to a portfolio consisting of _________________. A. the risk-free asset combined with at least one risky asset B. the market portfolio combined with the minimum variance portfolio C. securities from domestic markets combined with securities from foreign markets D. common stocks combined with bonds

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management For Public Health And Not For Profit Organizations

Authors: Steven A. Finkler

2nd Edition

0131471988, 978-0131471986

More Books

Students also viewed these Finance questions

Question

Explain the need for and importance of co-ordination?

Answered: 1 week ago

Question

Explain the contribution of Peter F. Drucker to Management .

Answered: 1 week ago

Question

What is meant by organisational theory ?

Answered: 1 week ago

Question

What is meant by decentralisation of authority ?

Answered: 1 week ago