Part A: Mathematical Question

1. An investor buys 2 round lot shares of Lenovo at $62 per share on margin. The initial margin requirement is 70%, and the maintenance margin is 30%. The investor can borrow at the rate of 7% annually. Lenovo pays dividend of $0.53 per quarter. The investor expects to sell the shares after nine months later at a price of 15% higher than buying price. (a) What is the actual margin if the price drops to $51? (b) Calculate the margin call price. (c) What is the actual margin if the price drops to $37? (d) If the investor had to recover from margin call how many shares he or she needs to sell. (e) If the investor had to recover from margin call how much cash he or she needs to deposit. (f) If the investor needs to recover from margin call how much debt, he or she needs to repaid. (g) Calculate the total dividend and interest amount. (h) What is the return on invested capital for this investor after nine months? What is the annual return? 2. A bond with a face value of a $1000, 10% coupon bond with 7 years to maturity if the YTM is 12% annually. (a) Calculate the bond price. (b) Calculate the duration. (c) Calculate the current yield of the bond. (d) Calculate the percentage change in the price of the bond if YTM increases by 1%. (e) Find the effective duration of this bond if a 30 basis point change in yield.

Part B: Theoretical Question

1. Rashed bought a stock three years ago for $7 a share. Today, June 12, the stock is selling for $82 a share. Rashed is afraid that the price will fall and does not want to lose his profits so he places a stop-loss order to sell at $80. The stock sells between $81 and $85 throughout the remainder of the day on June 12. On the morning of June 13, the stock opens at $10 a share based on rumors of a possible bankruptcy due to inappropriate accounting procedures. Which one of the following statements is true concerning this situation? 2. On May 15, Maruf placed a good-'til-canceled order to buy 200 shares of ABC at $10 a share. ABC sold between $10.50 and $11.00 on that day. Over the following two months the stock price continued to rise and Maruf forgot about the order. After the markets closed on August 6, some bad news concerning ABC was released. The stock opened on August 7 at a price of $8.00 a share. Which one of the following statements is correct concerning Marufs' order?