Question

1. Stock XYZ is currently trading at $35.48. You want to enter the market at $33....

1. Stock XYZ is currently trading at $35.48. You want to enter the market at $33. All of the following orders can be used EXCEPT (1 point):

  • Stop buy
  • Stop sell
  • Market
  • Limit sell

2. Oak Street Health went public on August 6, 2020 with an IPO price of $21 per share. Go to Yahoo Finance, obtain the closing price on its first trading day and calculate the IPO underpricing (1 point):

  • 149.5%
  • 190.5%
  • 90.5%
  • 49.5%

3. You want to short sell 1000 stocks of company Y. You borrow the shares and sell them at $25 per share in January. In February, stock price decreased to $23.50, and in March stock price increased to $26.50. Calculate your rate of return if you close transaction in February (1 point):

  • 6.0%
  • -6.0%
  • 5.4%
  • 7.2%

4. You want to short sell 1000 stocks of company Y. You borrow the shares and sell them at $25 per share in January. In February, stock price decreased to $23.50, and in March stock price increased to $26.50. Calculate your rate of return if you close transaction in March (1 point):

  • 6.0%
  • -5.4%
  • -7.2%
  • -6.0%

5. You want to purchase $50,000 worth of Y stock which is currently trading at $17 per share, using your margin account. If the initial margin is 45% and maintenance margin is 30%, at what price will you receive a margin call (1 point)?

  • $13.1
  • $15.9
  • $10.9
  • $11.9

6. You purchased 10,000 shares of Y stock at $55 per share on margin. Assume that initial margin is 50% and margin interest rate is 7%. If you sell the shares two years later for $67 per share, calculate your return using margin (1 point):

  • 50.0%
  • 36.6%
  • 21.8%
  • 43.6%

7. Spotify went public on April 3, 2018 on NYSE through a direct listing procedure, rather than a standard IPO. In direct listing a stock starts trading on an exchange without a formal offering. IPO price is determined by buy and sell orders submitted by market participants before the first day. Some of direct listing advantages include lower costs of going public (no underwriters) and process transparency which is good for both buyers and seller of stock. Please discuss disadvantages of going public through a direct listing (4 points).

8. In order for you to be indifferent between the after-tax returns on a corporate bond paying 8.5% and a tax-exempt municipal bond paying 6.12%, what would your tax bracket need to be? (1 point)

  • 33%
  • 24%
  • 28%
  • 15%

9. Consider a 4.0% coupon seven year T-note with a par of $1,000 which pays interest semiannually. The maximum number of STRIPS this T-note could be stripped into is _____ (1 point):

  • 8
  • 7
  • 11
  • 15

10. You purchased a convertible bond tree years ago. It has a 7.5% coupon rate, par value of $1,000, interest is paid semiannually, and the bond matures in 6 years. If the bond is convertible at $31.25 per share, calculate conversion ratio (1 point):

  • 25
  • 32
  • 31
  • 35

11. You purchased a convertible bond tree years ago. It has a 7.5% coupon rate, par value of $1,000, interest is paid semiannually, and the bond matures in 6 years. If the firm stock currently trades at $41.50 per share, calculate conversion value (1 point):

  • $1286
  • $1000
  • $1328
  • $957

12. You purchased a convertible bond tree years ago. It has a 7.5% coupon rate, par value of $1,000, interest is paid semiannually, and the bond matures in 6 years. If the bond currently trades at $1,125 and firm stock currently trades at $41.50 per share, calculate conversion premium (1 point):

  • -15.3%
  • 15.3%
  • 12.5%
  • -7.5%

13. Consider a preferred stock that currently pays $2.25 annual dividend. The current interest rate in the market is 5.6%. How does a preferred stock price change if the interest rate increases to 6.3%? (1 point)

  • increases by $4.5
  • increases by $0.70
  • decreases by $4.5
  • decreases by $5.6

14. For which of the following investors would zero-coupon bonds be MOST appropriate? (1 point)

  • John, age 25, graduate student living on stipend
  • Anabelle, age 34, aggressive risk tolerance, has a stable job
  • Peter and Mary, parents of Rosa who will need $50,000 for college tuition in 4 years
  • Catherine, age 65, retired but in need of fixed cash flows in addition to her retirement benefits

15. Company XYZ issued a ten-year corporate bond three years ago. The bond has 8% coupon rate, par value of $1,000 and pays interest semiannually. If the current interest rate is 6.5%, should XYZ call the bond? (1 point)

  • No because it is an extremely attractive investment compared to other corporate bonds
  • No because if XYZ issues a new bond, investors will be greatly exposed to financial risk
  • Yes because it decreases investors exposure to reinvestment risk
  • Yes because it can decrease payments if XYZ calls the bond and issues a new one

16. Go to the Federal Reserve website and obtain daily yields for November 1, 1999. The yield for securities with ten years till maturity equals ____ (1 point):

  • 6.06%
  • 6.55%
  • 4.57%
  • 3.12%

17. On November 1, 1999 the yield curve share could be described as _____ (1 point):

  • normal because long-term interest rates are lower than mid-term interest rates
  • normal because interest rates are positively related to maturities
  • flat because most interest rates remain similar

inverted because interest rates decrease with mature

Homework Answers

Answer #1

1.MARKET

Market order- Market order instantly executes the order at spot price. Ao it cannot be used

You can use stop sell and limit sell options to short the stock at target price. And Stop Buy to go long on the same.

2.90.5%

The share closed on 40 a piece.and ipo was issued at 21 a piece. So Underpricing = 40-21/21. *100 = 90.5%

3.6%

Shorting was done at 25 and covered at price 23.50

So a profit of 1.5 on 25 . Ie 1.5/25 *100 = 6%

4.(-6%)

Shorting at 25 and the position was covered at 26.50

A loss of 25-26.50= -1.50 Loss % = -1.50/25 *100 = -6%

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You purchased XYZ stock at 100 USD per share. The stock is currently trading at 120...
You purchased XYZ stock at 100 USD per share. The stock is currently trading at 120 USD, you can protect your gains by a_____ Select one: a. Market order b. Stop buy order c. Limit-sell order d. Limit-buy order
Currently the stock of XYZ Ltd. is selling for $50 per share, which was trading at...
Currently the stock of XYZ Ltd. is selling for $50 per share, which was trading at $55 one week earlier and you are certain that the price will fall further. To take the advantage of this downward price momentum you sell short 1000 share of XYZ Ltd at the current market price. You want to make $6000 profit from this short selling. You place an order with your broker to purchase the shares at a certain price to cover the...
8) Suppose a​ seven-year, $1,000 bond with a 10.96% coupon rate and semiannual coupons is trading...
8) Suppose a​ seven-year, $1,000 bond with a 10.96% coupon rate and semiannual coupons is trading with a yield to maturity of 8.00%. a. Is this bond currently trading at a​ discount, at​ par, or at a​ premuim? Explain. b. If the yield to maturity of the bond rises to 8.73% ​(APR with semiannual​ compounding), at what price will the bond​ trade? a. Is this bond currently trading at a​ discount, at​ par, or at a​ premuim? Explain. The bond...
You are considering investing $860 in Higgs B. Technology Inc. You can buy common stock at...
You are considering investing $860 in Higgs B. Technology Inc. You can buy common stock at $26.06 per share; this stock pays no dividends. You can also buy a convertible bond ($1,000 par value) that is currently trading at $860 and has a conversion ratio of 28. It pays $51 per year in interest. If you expect the price of the stock to rise to $38.78per share in 1 year, which instrument should you purchase? 1) The holding period return...
Walmart stock is currently trading at $95 per share. A call option on Walmart with an...
Walmart stock is currently trading at $95 per share. A call option on Walmart with an exercise price of $80 is trading at $17.50. Tessa wants to sell a call option on Walmart without actually owning the stock, how much margin will you be required to put?
company's convertible bond has a conversion ratio of 50, and its stock is currently trading for...
company's convertible bond has a conversion ratio of 50, and its stock is currently trading for $32/share. 1. What is its Conversion Price? 2. What is the bond’s current price?
IV) Kamwala Plc whose shares are currently trading at K20 per share, has issued 100,000 units...
IV) Kamwala Plc whose shares are currently trading at K20 per share, has issued 100,000 units of convertible bonds, each with a nominal value of K100. The bond has a convertible market price of K90 and conversion price of K25. The coupon interest rate is 8% payable annually. The bond has four years to maturity and any bond not converted will be redeemed at K115 per K100 nominal value of the bond. The share price for Kamwala Plc on the...
1)Assume that you pay ​$918.16 for a​ long-term bond that carries a coupon of 6.5​%. Over...
1)Assume that you pay ​$918.16 for a​ long-term bond that carries a coupon of 6.5​%. Over the course of the next 12​ months, interest rates drop sharply. As a​ result, you sell the bond at a price of ​$1 comma 035.98. a. Find the current yield that existed on this bond at the beginning of the year. What was it by the end of the​ one-year holding​ period? b. Determine the holding period return on this investment. ​(Hint​: See Chapter...
A bond with 6 years remaining until maturity is currently trading for 102 per 100 of...
A bond with 6 years remaining until maturity is currently trading for 102 per 100 of par value. The bond offers an 8% coupon rate with interest paid semiannually. The bond is first callable in 2 years, and is callable after that date on coupon dates according to the following schedule. End of Year 4 5 6 Call price 103 102 100 A. What is the bonds YTM? B. The bond's annual yield-to-first call is closest to? C. What is...
A convertible bond issued by firm BigRed has a conversion ratio of 20, coupon rate of...
A convertible bond issued by firm BigRed has a conversion ratio of 20, coupon rate of 6.7% (interest paid annually), maturity of 8 years, yield to maturity of 6.0%, and par value of $1,000. The yield to maturity of a non-convertible bond issued by the same firm is 8.2%. BigRed's stock price is currently $39.71 and the stock pays an annual dividend of $1.61 per share. All rates are annualized assuming periodicity of 1 (i.e. annual compounding). What is the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT