MULTIPLE CHOICE QUESTIONS: 1. The most reliable measure of a liquid market is typically: . The amount of volume traded on a daily basis The protability associated with being a dealer in that market . The size of the spread between the bid price and the ask price The number of market participants pop> 2. You buy a 182day U.S. Treasury Bill at a price of 99.346% of par. Your e'ective annualized yield (i.e., including compounding) is closest to: A. 1.25% B. 1.32% C. 1.34% D. 1.37% 3. Akey distinction between LIBOR and SOFR is: A. SOFR is calculated on a \"bond basis\6. Which of the following statements regarding a short squeeze is most probably false? A. Those being squeezed are exposed to an unlimited loss B. Buyers oen do not know each other and/or are not working in concert C. Securities being subject to a short squeeze ten to exhibit higher than usual price volatility D. Investors who buy stocks to squeeze short sellers typically have superior insights into the fair valuation of these securities BRIEF ESSAYS: 1. Suppose investors can earn 52% per three months on a Treasury note with three months remaining. What pm would you expect a 3-month 'lreasury bill with a face amount of $10,000 to sell for? 2. You wish to invest $100,000 for three months and are considering high quality (i.e., A-l / P-l rated) commercial paper (\"CP\") or a bank certicate of deposit (\"CD\") as your alternatives. The current yield for 3-month CP of high quality non-nancial issuers is 2.15%, while the best 3-month CD rate you can nd from a commercial bank is 1.90%. Assuming the commercial bank is not nancth stronger than the CP issuer, what might explain this yield differential? 3. Imagine you are the Chief Investment Ofcer of a large tax-exempt organization that invests directly in the U.S. stock market. List three types of friction cost you would monitor in connection with your organization's trading activity. Which of these friction costs are probably of most concern to you? Explain your answer. 4. You decide to purchase 50,000 shares of Boeing at S365/share, while borrowing the maximum amount permitted by your broker in order to do so. The initial margin requirement is 60% and the maintenance margin requirement is 40%. a. At what price per share will you receive a margin call? b. What is the return on the amount of \"equity\" margin you originally posted to buy these shares it the price of Boeing's stock immediately falls to the level at which you will receive a margin call? 5. Assume you entered a 2,500 share short position in Spacely Sprockets at $31.50! share, which is the only position currently in this trading account. The initial margin you were required to post was 52% and the maintenance margin is 38% . a. At what price per share will you receive a margin call? b. If the share price does rise just enough to trigger a margin call, (i) how much margin will remain in the account when you receive the margin call and (ii) how much additional cash will you be required to contribute to the account in order to maintain the short position? 6. Assume Redag, an \"equity event\" hedge fund, held a 6% (as a percentage of the Fund's equity capital) short position in Volkswagen during October, 2008, based upon a market price of 200 euros per share. If Volkswagen shares then soared to 985 euros per share, what would that individual position have cost the Fund in terms of the Fund's overall return? [Note: you can assume the Fund did not have to make any payments of Volkswagen dividends or other fees related to this position during this period]