Question

1-You recently sold 50 shares of Microsoft stock to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following best describes this transaction? *

A. This is an example of a direct transfer of capital.

B. This is an example of a primary market transaction.

C. This is an example of a money market transaction.

D. This is an example of a derivative market transaction.

2. What is the duration of a $1,000, 8% coupon bond with 4 years to maturity. Assume that all the market interest rates are 10%. *

A. 4 years

B. 3.56 years

C. 3 years

D. 3.75 years

3. If you expect the inflation rate to be 17 percent next year and a one-year bond has a yield to maturity of 8 percent, then the real interest rate on this bond is:

A. 10%

B. 25%

C. 9%

D. 8%

8. You won a lottery of $15 million, payable over 30 years at $500,000 per year with the first payment to be made one year from now. What is the lottery worth if the interest rate is 11%. *

A. $5.0021 million

B. $15 million

C. $150 million

D. $5.48 million

You borrow $10,000 from a loan shark. If you will owe $20,000 in 5 years, what is the yield to maturity on this loan? *

A. 10%

B. 14.87%

C. 20%

D. 15%

15. What is the present value of $25,000 due in 50 years if the discount rate is 7.5%? *

A. $627.22

B. $67.23

C. $672.23

D. $500

16. Based on annual compounding, what would be the YTM be on a 15-year,12% coupon rate, $1,000 par value bond that’s currently trading at $800? *

A. 15.5%

B. 12%

C. 14%

D. 10%

A tax-free municipal bond has an interest rate of 4.3%. What is the equivalent taxable yield on a regular coupon bond given a 40% tax bracket? *

3.68%

7.16%

8.34%

9.00%

Other:

You short sell 100 shares of Microsoft, whose price is currently $50 per share, and give your broker $10,000 to establish a margin account. Assume at the end of the year Microsoft pays a dividend of $3 per share. If the maintenance margin is 30%, how high can the price of Microsoft go before you receive a margin call? *

$35.4

$36.75

$37.48

$38.13

Other:

Arno Traders opened an account to short sell 4,000 shares of American express at $60 per share. The initial margin requirement was 50%. (The margin account pays no interest.), and the stock has paid a dividend of $2.00 per share. How much in cash or securities must Amo put into his brokerage account? *

$24,000

$120,000

$12,000

$240,000

Other:

Sami is an investor and he wants to buy 400 shares of HP stock that is valued at $100 per share. He invested 30,000 of his equity and the borrowed the other $10,000 from his broker. Assuming an interest rate on the margin loan on 10% per year, what would the investor’s rate of return be if HP stock goes up 10% by year end? *

5%

10%

12%

Other:

Suppose that you are bullish on HP Stock. You buy 100 shares at the current stock price of $99/share. To afford your purchase, your initial margin requirement is 70%.You will borrow the remaining amount from your broker at 9% interest rate. Calculate your net worth when you first purchased the stocks. *

$2,970

$9,900

$6,930

Other:

Answer #1

**1]**

A is the correct option. This is an example of a direct transfer of capital because the capital investment is directly transferred between two parties without an intermediary

B is incorrect. In a primary market transaction, the company issues shares to investors

C is incorrect. Money market securities are short-term debt securities, not stocks

D is incorrect. Derivatives are instruments whose prices are based on the price of another underlying asset. Stocks are not derivatives.

1-You recently sold 50 shares of Microsoft stock to your brother
at a family reunion. At the reunion your brother gave you a check
for the stock and you gave your brother the stock certificates.
Which of the following best describes this transaction? *
A. This is an example of a direct transfer of capital.
B. This is an example of a primary market transaction.
C. This is an example of a money market transaction.
D. This is an example...

2. What is the duration of a $1,000, 8% coupon bond with 4 years
to maturity. Assume that all the market interest rates are 10%.
*
A. 4 years
B. 3.56 years
C. 3 years
D. 3.75 years
3. If you expect the inflation rate to be 17 percent next year
and a one-year bond has a yield to maturity of 8 percent, then the
real interest rate on this bond is:
A. 10%
B. 25%
C. 9%
D. 8%...

1)
You sell short 200 shares of Doggie Treats Inc. that are currently
selling at $25 per share. You post the 50% margin required on the
short sale. If your broker requires a 30% maintenance margin, at
what stock price will you get a margin call? (You earn no interest
on the funds in your margin account, and the firm does not pay any
dividends.)
A.
$32.25
B.
$31.50
C.
$28.85
D.
$35.71
2) You purchased 250 shares of common...

____ 25. You recently sold to your brother 200 shares of
Disney stock, and the transfer was made through a broker, and the
trade occurred on the NYSE. This is an example of:
a. A futures market transaction.
b. A primary market transaction.
c. A secondary market transaction.
d. A money market transaction.
e. An over-the-counter market transaction.
____ 26. Which of the following statements is CORRECT?
a. The New York Stock Exchange is an auction market with a
physical...

You sold short 400 shares of a stock for $60 per share. Your
broker’s initial margin requirement is 60%. The broker’s
maintenance margin requirement is 35%. You initially want to put up
as little capital (money) as possible to support the short sale.
A.) How much capital must you have in your account before you can
make the short sale? B.) If the stock price goes to $70 per share,
will you receive a margin call? Show your work to...

You short-sell 50 shares of XYZ stock at $100 per share. Your
broker's initial margin requirement is 50% of the value of your
short position. You put up cash to satisfy the initial margin
requirement.
a) What will be your rate of return (after 1 year) if XYZ stock
sells at $110 a share? Assume that you do not earn any interest on
your funds in the margin account and that the stock pays a dividend
of $1.50 a share...

You sell short 700 shares of Microsoft that are currently
selling at $30 per share. You post the 40% margin required on the
short sale. If you earn no interest on the funds in your margin
account, what will be your rate of return after 1 year if Microsoft
is selling at $27? (Ignore any dividends.)

You just bought 200 shares of a stock priced at $48 per share
using 50% initial margin. The broker charges 4% annual interest
rate on the margin loan and requires a 30% maintenance
margin. One year later stock price dropped to 31 and you
recieved margin call, to restore your margin to the initial margin
level, how much would you need to deposit?
Answer ___+/- ____
You sell short 100 shares of company A which are currently
selling at $32 per...

You purchased 500 shares of stock XYZ for $80 per share. You
borrowed $15,000 from your broker to help pay for the purchase. A.)
How much initial percent margin do you have in your account? B.) If
your broker does not charge any interest payments on margin loans,
how low can the price of the stock XYZ fall before you receive a
margin call? Your broker has a maintenance margin requirement of
40% for stock XYZ.
Please show your work!...

2. Suppose you short sell 100 shares of stock X, which now sells
for $200/share. What is your maximum possible loss? What happens to
the maximum loss if you simultaneously place a "stop-buy" order at
$210?
3. Suppose that you open a brokerage account and purchase 300
shares of stock Y at $40/share. You borrow $4,000 from your broker
to help you pay for the purchase. The interest rate on your loan is
8%. What is the margin in your...

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