Instructions: You need to show your work in order to receive any credit. Round numerical values up to 5 decimals (e.g. 0.12345 or 12.345%, where appropriate) and dollar values up to cents (e.g. $12.34). Solve the questions in an organized manner into the sheet with the same name in the Excel file IM Homework Set 1.xlsx and submit the file via email at mehmet.f.yalin@pitt.edu by the announced due date no later than the beginning of our session. 1. Consider an index that is composed of the three biotechnology stocks in the table below. Calculate the market value- and equal-weighted returns of this index during 2020. Ticker Adjusted Price End of 2019 Adjusted Price End of 2020 Shares Outstanding AMGN $234.59 $229.92 588,000,000 BIIB $296.73 $244.86 166,000,000 GILD $61.60 $63.15 1,260,000,000 2. Using the price information of the three stocks in the table below, calculate the daily level of their price-weighted index for the days 1 through 5. Stock A pays a $7 special dividend on day 2 and does a 3-for-1 stock split on day 5, while stock C does a 1-for-4 reverse stock split on day 3. Day Price of A Price of B Price of C 1 $60 $80 $31 2 $54 $80 $30 3 $55 $81 $118 4 $54 $77 $116 5 $19 $78 $117 3. Suppose you purchased 10,000 The Travelers Companies, Inc. (TRV) shares at $136.95 per share at the end of 2019 using $700,000 of your own funds and borrowing the remainder from your broker. a. What was your initial margin? b. What happened to your margin if TRV was trading at $140.37 per share at the end of 2020? c. If your broker had a 45% maintenance margin requirement, how far could TRV fall to before you received a margin call? d. How much money would you have to put into your account in order to satisfy the maintenance margin requirement if TRV suddenly dropped to $110 per share? e. TRV paid a dividend of $3.37 per share during 2020. What was the annual return of this investment if your broker was charging 3% annual interest for the loan? Instructions: You need to show your work in order to receive any credit. Round numerical values up to 5 decimals (e.g. 0.12345 or 12.345%, where appropriate) and dollar values up to cents (e.g. $12.34). Solve the questions in an organized manner into the sheet with the same name in the Excel file IM Homework Set 1.xlsx and submit the file via email at mehmet.f.yalin@pitt.edu by the announced due date no later than the beginning of our session. 1. Consider an index that is composed of the three biotechnology stocks in the table below. Calculate the market value- and equal-weighted returns of this index during 2020. Ticker Adjusted Price End of 2019 Adjusted Price End of 2020 Shares Outstanding AMGN $234.59 $229.92 588,000,000 BIIB $296.73 $244.86 166,000,000 GILD $61.60 $63.15 1,260,000,000 2. Using the price information of the three stocks in the table below, calculate the daily level of their price-weighted index for the days 1 through 5. Stock A pays a $7 special dividend on day 2 and does a 3-for-1 stock split on day 5, while stock C does a 1-for-4 reverse stock split on day 3. Day Price of A Price of B Price of C 1 $60 $80 $31 2 $54 $80 $30 3 $55 $81 $118 4 $54 $77 $116 5 $19 $78 $117 3. Suppose you purchased 10,000 The Travelers Companies, Inc. (TRV) shares at $136.95 per share at the end of 2019 using $700,000 of your own funds and borrowing the remainder from your broker. a. What was your initial margin? b. What happened to your margin if TRV was trading at $140.37 per share at the end of 2020? c. If your broker had a 45% maintenance margin requirement, how far could TRV fall to before you received a margin call? d. How much money would you have to put into your account in order to satisfy the maintenance margin requirement if TRV suddenly dropped to $110 per share? e. TRV paid a dividend of $3.37 per share during 2020. What was the annual return of this investment if your broker was charging 3% annual interest for the loan
