Problem 4.5 Following the financial crisis, the 52-week low for the Nasdaq index occurred on 9/4/09 at 1982.05, while the 52-week high occurred on 4/26/10 at 2,535.28. For the DJIA, the dates are the same, and the comparable numbers are 9,302.28 and 11,308.95. Which market performed better during that time period?

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PLEASE ANSWER IN ORDER AND SHOW WORKING

5.4 Assume an initial margin requirement of 50 percent and a maintenance margin of 30 percent. An investor buys 100 shares on margin at $60 per share. The price of the stock subsequently drops to $50.

a. What is the actual margin at $50?

b. The price now rises to $55. Is the account restricted?

c. If the price declines to $49, is there a margin call?

d. Assume that the price declines to $45. What is the amount of the margin call? At $35?

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Problem 6.16 Using data for three periods, construct a set of returns that will produce a geometric mean equal to the arithmetic mean.

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Computational problem 6.2 Using the five years of return from 6.1 (2010, 15.06%; 2011, 9.9%; 2012, 16.1%; 2013, 19.7%; and 2014, 10.7%), assume that one of the five years during the second half of the decade, 2015-2019, shows a loss of 10 percent. What would the geometric mean of the remaining four years have to be for the decade as a whole to average a 10 percent return for the index?

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