Description

1.               Explain in a half page The T-Bill.

a.      Definition

b.      How it is issued.

c.       How it is taxable. 

2.               Explain all types of limit buy orders (with respect to price and time).

Be very specific and give a numerical examples.

3.                Consider the following three stocks:

                        Stock               Price          Number of shares outstanding

                        Apple              $240                            100

                        MSFT              $152                            200

                        Boeing             $130                            300

a.       Calculate the price-weighted index constructed with the three stocks using a divisor of 0.165897

b.      How would the divisor (in part (a) above) change if Boeing pays 20 percent stock dividend and the stock of MSFT is split 3 for 1?

c.       Calculate the Value-weighted index constructed with the three stocks using a divisor of 100.

d.      How would the divisor (in part (a) above) change if Boeing pays 20 percent stock dividend and the stock of MSFT is split 3 for 1?

4.         On February 3, 2020 you purchased 300 shares of MSFT common stock at $152 per share on margin. The initial margin is 60 percent. MSFT paid an amount of dividend of $2 per share on March 1, 2020. Today (April 3, 2020) you close your position at $158 per share.  The interest rate is 12 percent per year compounded daily.

                        a.         Prepare an initial margin account.

                        b.         Determine the holding period rate of return of your investment.

                        c.         Determine the annual percentage rate of return of your investment.

5.         You sold short 200 shares of IBM common stock at $105 per share. Assume that the initial margin is 55 percent.

a.                   Prepare an initial margin account.   

b.                  At what stock price would you receive a margin call if the maintenance margin is 30 percent?

c.                   Assume you received a margin call and the broker asks you to bring cash money to replenish your account to its original margin (i.e bring your contribution back to 55 percent)? How much cash you are required to bring?

6.         If the coupon rate on a bond is 4.5% and the bond is selling at a discount, which of the following is the most likely yield to maturity on the bond?  You must explain

A.        4.3%

B.        4.5%

C.        5.2%

D.        4.0%

7. The price of a bond (with face value of $1,000) at the beginning of a period is $980 and at the end of the period is $970. What is the holding-period return if the annual coupon rate is 6%?  You must calculate.

A.        0.10%

B.        6.12%

C.        5.10%

D.        5.6%

8.         An investor pays $990 for a bond. The bond has an annual coupon rate of 8%,

and a maturity of 5 years. What is the yield to maturity of this bond?  You must

calculate.

A.        16.40%

B.        8.24%

C.        7.75%

D.        9.70%

9.                     A _____ is an example of an exchange-traded fund (ETF).

            A)  WMT

            B)   MSFT

            C)   QQQ

            D)   INTC

            E)   all of the above

10.       Name the functions of open end mutual funds

11.       Consider a no-load mutual fund with $300 million in assets, 40 million in liabilities, and 10 million shares at the start of the year of year 2019, and $390 million in assets, 50 million of liabilities, and 12 million shares at the end of the year 2019. During the year investors have received income distributions of $2.5 per share, and capital gains distributions of $0.50 per share. 

            Calculate the rate of return on the fund for the year?

12.       If the yield to maturity of a bond is 10% and the bond is selling at a discount, which of the following is the most likely to describe the current yield of the bond?

  You must explain.

A.        10%

B.        less than 10%

C.        more than 10%

D.        cannot be determined%

13.  You have just purchased one of IBM bonds. The bond pays coupon annually, has a current price of $1,097.37.  The current yield of this bond is 10.9353 percent. The bond matures in 7 years and has a face value of $1000. 

a.                 Determine the yield to maturity of the bond.

b.                What would the price of the bond be three years from today if the yield to maturity does not change?

14.  You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% and a par value of $1,000.  What would your rate of return at the end of the year be if you sell the bond?  Assume the yield to maturity on the bond is 11% at the time you sell. (You must calculate)

            A)  10.00%

            B)   20.42%

            C)   13.8%

            D)  1.4%

            E)   none of the above