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1. Mr. Kim has just opened a margin account with a local brokerage firm. The firm has a policy of 60% initial margin and 40% maintenance margin. Mr. Kim initially buys 100 shares of a stock at $50 per share on margin.
a) What are his initial equity and loan balances?
b) To what price may the security decline before a margin call is required?
c) If the stock suddenly declines to @25 per share and the broker requires that the maintenance requirement be restored, how many shares must be sold to restore the maintenance margin?
2. You purchased 500 shares of the New Fund at a price of $25 per share at the beginning of the year. You paid a front-end load of 4%. The securities in whchi the fund invests increase in value by 13% during he year. The fund’s expenses ratio is 1.3%. Calculate
a) Initial investment
b) Dollar amount of the front-end load
c) Terminal value
d) Rate of return if you sell your shares at the end of the year?
A bond that pays interest annually yields a rate of return of 10.00 percent. The inflation rate for the same period is 4 percent. What is the real rate of return on this bond?
Is aggregate demand being greater than potential GDP the only way for inflation to occur in the AD-AS model? Briefly explain.
The problem is the main one Quest has been working on: to increase sales of their tours. The solution they selected is to offer Quest’s most popular tours more often. The five most popular tours are to Italy, France, Australia, Belize, and Alaska. No..
You want to accumulate $2 millions by your retirement date, which is 25 years from now. You will make 25 deposits in your bank, with the first occurring today. The bank pays 9.41% interest, compounded annually. How much must your first deposit be to ..
Why high yield bond returns are more correlated to common stock returns than to investment-grade bond returns?
Jiminy's Cricket Farm issued a 30-year, 7 percent semi-annual bond 6 years ago. The bond currently sells for 80 percent of its face value. The book value of the debt issue is $19 million. The company's tax rate is 32 percent. What is the company's to..
Orange Computer, Inc.’s stock prices at the end of the last four years were $25, $27.50, $22.50 and $28.75. Each year they paid a dividend of $1 at the end of each year. What are your arithmetic and geometric average time-weighted rates of return? Wh..
A 20-year annuity immediate with annual payments is calculated at 6.2%. The first payment is 500 and increases at 4% annually. Find the present value of this annuity.
Calculate the equity capital ration. If 2 billion in bad loans were removed from the bank's assets, show how the equity capital ratio would change.
What does duration tell you about the sensitivity of a bond portfolio to interest rates. - What are the limitations of the duration measure?
Stock J has a beta of 1.20 and an expected return of 13.16 percent, while Stock K has a beta of .75 and an expected return of 10.10 percent. You want a portfolio with the same risk as the market. What is the expected return of your portfolio?
What government or Fed policies might have prevented the stock market crash and bank panics that started the financial crisis?
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