please show how you did it..i will use this as study guide..thank you
preferred stock , 5. You in veas a front-endd fund is the pers%. After you lig annual Part II (15 points each): 5. You invest $10.000 each in two separate funds. The first fund which has a front-end load of 6% and a back-end load of 2.5%. ratio is 2%. The second fund is the Performance (PER) Fund which h loads, but the annual expense ratio is 5%. After you liquidate your hol identical amounts coming in from both funds. HL's annual retur period has been 14%. A) What annual return must have PER generated if you invested for 1 year HL 10,000 separate funds. The first fund is the Heavy load (HL) Fund ad a back-end load of 25% The fund's annual expense Fund which has no front or back end "both funds. HL's annual return over your investment quidate your holdings, you end up with -5 I RER inu 10,000 PER : 10,000 (1-0.05 ) 9.500 9500-10000 -- 5% first 6.16 2.5% 10,000 20 nex 5% 14% B) What annual return must have PER generated if you invested for 10 years? 10,000 (1-0.05) 5987.39 5987,37-70000 - -40,13% 10,000 T C) In order to keep up with HL's performance, what needed to happen to the return from PER when investment period increased from 1 to 10 and why? HL=10,000 (1-.06%) (07.14-.02)'(1 -0.0250) 27698.6 I PER= 10,000 (1.05) 7698,22 The PER needed to invest up to 5 year and lomant to keep up with HL's performance Page 2 6. The following stocks are used to construct indexes VINDX, PINDX, and ENDX described below. Current Number of Shares Stock Price Outstanding $10 400 4000 $20 6000 L $30 100 3 000 13,000 /1000 = 13 A) VINDX is a value-weighted index with a current level of 1.000. If A and B increase by 10% and C decreases by 20% what would be the new index level after these price changes? 4400 B 300 1030.77 6600 C 2400 13,400 1 13400-3000 13,000 - 3.10% - 1030.77 B) PINDX is a price-weighted index with a current level of 250. Stock C undergoes a 3-for-1 split before any price change. Then A and B increase by 10% and C decreases by 20%. What will be the new index level? A 11 60 B 22 57-60 .-5% c 24 C) ENDX is an equal-weighted index. Why is it difficult to maintain this index? Explain by describing what adjustments the index need when A and B increase by 10% and C decreases by 20% A 10 11 B 20 22 c 30 24 10+ 0 + (-20) 7. You are bearish on Rock Bottom (ROBO) stock. It is currently trading at $50 per share. You have $10,000 and want to short as much of the stock as you can. The initial margan requirement for shorting is 40%. The broker does not pay any interest on funds you keep in your account A) How many shares can you short, if you use all your funds? 10000 200 shares MV = 10000 1+ 40% MV=7142.86 10,000 x 4% - 4000 B) Within the first week of your investment ROBO stock price comes within 10 cents of generating a margin call. What must be the trading price for ROBO at that point? The maintenance margin requirement on short sales is 25%. MV 3500 - 2.256- 14,000 @200P 250P = 14,000 $56 -2 C) One month after you short ROBO, the share price is down by 20% and the company pays a cash dividend of $2 per share. You close out your position that day. What is your percentage return? 8,000 50-20% =440 x 200 2x200-400 -2 8400-10000 10,000 = -16% Part IIT (20 points each): Tidend today. The 5%, expect ratio of 25%. aplex Corporation (CC) Hoe hext 2 years. The risk-free rings retention rat . Complex Corporation (CC) stock maid as dividend today. The dividends are expected to wercase at a rate of 20% for the next 2 years. The risk-free rate is 5%, expected market retur is 13% and the beta for CC is 1.5. The company has an earnings retentioma A) What is the value of CC stock if dividends are expected to increase at ompany has an earnings retention ratio of 25%. the first 2 years?
