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In January 2 0 1 9 , Mr . Tom McInish won a prize of $ 9 0 0 , 0 0 0 . Tom
In January Mr Tom McInish won a prize of $ Tom decided to sit on hismoney waiting for a good investment chance. For the last few years, Tom has beeneducating himself about the stock market. Tom heard a lot of investment professionalstalking about making money by investing in new stocks offered to the public at initialpublic offerings IPOs So Tom is waiting for a good IPO to jump into the market. Tomstarted to learn about an upcoming IPO of an automobile company that so many peoplebelieve will change the future of the industry in the US and globally, thats Green MotorsGRMT Tom likes this new company so much and is ready to start his investmentjourney once the stock goes public on Dec th Tom was not able to purchase the stock at the IPO price of $ However, he purchasedthe shares in the secondary market for $ per share on January st His accountmanager is also very positive about GRMT so she advised him to use the maximumallowed margin to maximize his returns from this great investment opportunity. Tomsbroker's initial margin requirement is and she charges an interest rate of Jan he invested all his money $ in this stock, how much money will Tomborrow from his broker to use the entire margin in this transaction?a $b $c $d $e $ How many shares did he purchase if he used the entire allowed margin?a sharesb sharesc sharesd sharese shares What is the minimum initial margin requirement as specified by the Federal Reservesystem?abcde one year later in Jan the price of GRMT declined to $ What is his new margin now?abcde MrTom is concerned about receiving a margin call from his broker at this point.If you know that his broker has a maintenance margin of would you agree with himon his concern?a Yes, he should expect a margin call at this point because his new margin is now morethan the maintenance margin.b Yes, he should expect a margin call at this point because his margin now is less thanthe maintenance margin.c No he should not expect a margin call at this point because his new margin is nowmore than the maintenance margin.d No he should not expect a margin call at this point because his margin now is lessthan the maintenance margin based on your calculations Tom would receive a margin call at this point of the year if theGRMT price reaches?a $b $c $d $e $ Now, it is the end of the year Tom sold all his GRMT shares at $ per share. Whatwas his rate of return on this investment?abcde How much money does Tom have now?a $b $c $d $e $ Tom started to feel more comfortable trading stocks and wanted to navigate more tradingstrategies. He started to hear about short selling. Tom still does not fully understand howit works but he knows it is a way to make money when you are bearish about a certainstock. Tom is not into social media and strongly believes that social media stocks aresignificantly overvalued. His advisor tried to convince him not to let his personalpreference determine his investment strategies, but Tom said, I tried it once with GRMTand it worked, I know it will work again!!. So he decided to invest part of his moneyto shortsell the new social media company Eye City EC Tom sold shares of ECshort at a price of $ on December th of The broker has a marginrequirement on short selling He also decided that The remaining amount of themoney will be invested in the money market Municipal bonds. He purchased bondsissued by the state of Texas that have a yield of How much will be invested in the Municipal bonds?a $b $c $d $e $ Now it is May st the price of Eye City stock dropped to $ Tom is superexcited! He said to his broker I told you; this is going to be a penny stock in no time,and I am going to be rich!! His broker did not agree to that and advised him to cover hisposition and get out of it before the price bounces again. But he didnt listen If the maintenance margin on shortselling transactions is how far can the EC pricedecline before triggering a margin call?a Any Price declines trigger a margin callb Price declines dont trigger a margin callc The price must decline to $ to trigger a margin calld The price must decline by to trigger a margin calle The price must decline to be $ to trigger a margin call How far could EC stock price rise before Tom receives a margin call?a Price increases dont trigger a margin call.b The price that would trigger a margin call is $ c The price that would trigger a margin call is $ d The price that would trigger a margin call is $ e Any increase in the price would trigger a margin call. Now, it is Dec The municipal bond is now redeemed. However, the last fewmonths have been like a nightmare for Tom. EC stock price has been consistently rising.The price hits $ and Tom just received a margin call, so he decided to use the proceedsfrom his other investment in the money market to cover his position at the current price How much money did he earn from his investment in Texas state bonds, assuming hisincome tax rate is a $b $c $d $e $ How much more money did he need to deposit in his account to cover his shortsellingposition and get out of this investment experience? assuming no fees or dividendsneeded to be paida $b $c $d $e $ How much money does Tom have now in total?a $b $c $d $e $ Now, it is early Tom is looking back at his investment experience and is trying tolearn his lessons! But this time, he decided that the days of picking single stocks are over!And he became too busy to have such an active trading style. This time, Tom wants to tryinvesting his money in a fund and he has a total of $ to invest after heconvinced his wife to invest part of her savings with him. Currently, Tom is consideringtwo alternatives: alternative A: Bloom openend fund with a net asset value of $ per share and a frontend load of alternative B: TWE closedend fund with an offering price of $ per share and it isselling at a discount What is the offering price of the Bloom fund?a $b $c $d $e $ Tom decided to go with the fund that has a lower current offering price. Which fundwould he choose?a Bloomb TWE One year later, now it is Dec st: the net asset value of the fund that he chose is$ The fund is now selling at a premium of And the fund paid yearenddistributions of income and capital gains of $ If Tom decided to liquidate his investment in this fund now, what would be his rate ofreturn?abcde About how much will he and his wife have in total after he does so before paying theirtaxesa $b $c $d $e $ In Ron McInish, the oldest son of Tom, decided to invest in the same fund his dadchose but he only had $ He started his investment at the beginning of and hekept investing in it till Jan Now it is end of year This morning, Ron was reviewing his investment statements, heshowed the following information to his dad and asked him to help with some calculations.Please ignore any fund expenses info. in solving this questionYear Beginning balance Ending balance DividendsNo. Shares Share price No Shares Share price per shareplease notice that the dividends received at the end of each year have been used to purchase new sharesat the beginning of the following year what is the HPR for Ron in abcd What is the HPR of Ron during his entire investment horizon end of Pleasenotice that Ron has been reinvesting his entire proceeds from dividends during years and in the fund once they are receivedabcd What is the arithmetic average annual return of Ron during the whole investment period?abcd What is the Geometric average annual return of Ron during the whole investment period?abcd What is the dollar weighted average return of Ron during the whole investment period?abcd Assuming that the dollarweighted return is Rons nominal rate of return, what is Ronsreal rate of return if the annual rate of inflation during the investment period is abcd In December Ron offered his father to help him in creating and managing his newportfolio. After a lot of research, Ron presented his father with the following informationabout two security portfolios, a stock and a bond portfolio.State of the economy Probability Stock S Bond BDepression Recession Normal Economy Boom what is the expected return ER and standard deviation SD of stock Sa ER and SD b ER and SD c ER and SD d ER and SD what is the expected return and SD of Bond B
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In January Mr Tom McInish won a prize of $ Tom decided to sit on hismoney waiting for a good investment chance. For the last few years, Tom has beeneducating himself about the stock market. Tom heard a lot of investment professionalstalking about making money by investing in new stocks offered to the public at initialpublic offerings IPOs So Tom is waiting for a good IPO to jump into the market. Tomstarted to learn about an upcoming IPO of an automobile company that so many peoplebelieve will change the future of the industry in the US and globally, thats Green MotorsGRMT Tom likes this new company so much and is ready to start his investmentjourney once the stock goes public on Dec th Tom was not able to purchase the stock at the IPO price of $ However, he purchasedthe shares in the secondary market for $ per share on January st His accountmanager is also very positive about GRMT so she advised him to use the maximumallowed margin to maximize his returns from this great investment opportunity. Tomsbroker's initial margin requirement is and she charges an interest rate of Jan he invested all his money $ in this stock, how much money will Tomborrow from his broker to use the entire margin in this transaction?a $b $c $d $e $ How many shares did he purchase if he used the entire allowed margin?a sharesb sharesc sharesd sharese shares What is the minimum initial margin requirement as specified by the Federal Reservesystem?abcde one year later in Jan the price of GRMT declined to $ What is his new margin now?abcde MrTom is concerned about receiving a margin call from his broker at this point.If you know that his broker has a maintenance margin of would you agree with himon his concern?a Yes, he should expect a margin call at this point because his new margin is now morethan the maintenance margin.b Yes, he should expect a margin call at this point because his margin now is less thanthe maintenance margin.c No he should not expect a margin call at this point because his new margin is nowmore than the maintenance margin.d No he should not expect a margin call at this point because his margin now is lessthan the maintenance margin based on your calculations Tom would receive a margin call at this point of the year if theGRMT price reaches?a $b $c $d $e $ Now, it is the end of the year Tom sold all his GRMT shares at $ per share. Whatwas his rate of return on this investment?abcde How much money does Tom have now?a $b $c $d $e $ Tom started to feel more comfortable trading stocks and wanted to navigate more tradingstrategies. He started to hear about short selling. Tom still does not fully understand howit works but he knows it is a way to make money when you are bearish about a certainstock. Tom is not into social media and strongly believes that social media stocks aresignificantly overvalued. His advisor tried to convince him not to let his personalpreference determine his investment strategies, but Tom said, I tried it once with GRMTand it worked, I know it will work again!!. So he decided to invest part of his moneyto shortsell the new social media company Eye City EC Tom sold shares of ECshort at a price of $ on December th of The broker has a marginrequirement on short selling He also decided that The remaining amount of themoney will be invested in the money market Municipal bonds. He purchased bondsissued by the state of Texas that have a yield of How much will be invested in the Municipal bonds?a $b $c $d $e $ Now it is May st the price of Eye City stock dropped to $ Tom is superexcited! He said to his broker I told you; this is going to be a penny stock in no time,and I am going to be rich!! His broker did not agree to that and advised him to cover hisposition and get out of it before the price bounces again. But he didnt listen If the maintenance margin on shortselling transactions is how far can the EC pricedecline before triggering a margin call?a Any Price declines trigger a margin callb Price declines dont trigger a margin callc The price must decline to $ to trigger a margin calld The price must decline by to trigger a margin calle The price must decline to be $ to trigger a margin call How far could EC stock price rise before Tom receives a margin call?a Price increases dont trigger a margin call.b The price that would trigger a margin call is $ c The price that would trigger a margin call is $ d The price that would trigger a margin call is $ e Any increase in the price would trigger a margin call. Now, it is Dec The municipal bond is now redeemed. However, the last fewmonths have been like a nightmare for Tom. EC stock price has been consistently rising.The price hits $ and Tom just received a margin call, so he decided to use the proceedsfrom his other investment in the money market to cover his position at the current price How much money did he earn from his investment in Texas state bonds, assuming hisincome tax rate is a $b $c $d $e $ How much more money did he need to deposit in his account to cover his shortsellingposition and get out of this investment experience? assuming no fees or dividendsneeded to be paida $b $c $d $e $ How much money does Tom have now in total?a $b $c $d $e $ Now, it is early Tom is looking back at his investment experience and is trying tolearn his lessons! But this time, he decided that the days of picking single stocks are over!And he became too busy to have such an active trading style. This time, Tom wants to tryinvesting his money in a fund and he has a total of $ to invest after heconvinced his wife to invest part of her savings with him. Currently, Tom is consideringtwo alternatives: alternative A: Bloom openend fund with a net asset value of $ per share and a frontend load of alternative B: TWE closedend fund with an offering price of $ per share and it isselling at a discount What is the offering price of the Bloom fund?a $b $c $d $e $ Tom decided to go with the fund that has a lower current offering price. Which fundwould he choose?a Bloomb TWE One year later, now it is Dec st: the net asset value of the fund that he chose is$ The fund is now selling at a premium of And the fund paid yearenddistributions of income and capital gains of $ If Tom decided to liquidate his investment in this fund now, what would be his rate ofreturn?abcde About how much will he and his wife have in total after he does so before paying theirtaxesa $b $c $d $e $ In Ron McInish, the oldest son of Tom, decided to invest in the same fund his dadchose but he only had $ He started his investment at the beginning of and hekept investing in it till Jan Now it is end of year This morning, Ron was reviewing his investment statements, heshowed the following information to his dad and asked him to help with some calculations.Please ignore any fund expenses info. in solving this questionYear Beginning balance Ending balance DividendsNo. Shares Share price No Shares Share price per shareplease notice that the dividends received at the end of each year have been used to purchase new sharesat the beginning of the following year what is the HPR for Ron in abcd What is the HPR of Ron during his entire investment horizon end of Pleasenotice that Ron has been reinvesting his entire proceeds from dividends during years and in the fund once they are receivedabcd What is the arithmetic average annual return of Ron during the whole investment period?abcd What is the Geometric average annual return of Ron during the whole investment period?abcd What is the dollar weighted average return of Ron during the whole investment period?abcd Assuming that the dollarweighted return is Rons nominal rate of return, what is Ronsreal rate of return if the annual rate of inflation during the investment period is abcd In December Ron offered his father to help him in creating and managing his newportfolio. After a lot of research, Ron presented his father with the following informationabout two security portfolios, a stock and a bond portfolio.State of the economy Probability Stock S Bond BDepression Recession Normal Economy Boom what is the expected return ER and standard deviation SD of stock Sa ER and SD b ER and SD c ER and SD d ER and SD what is the expected return and SD of Bond B
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