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1. 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?
2. 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 account when you first purchase the stock? If the share price falls to $30 per share, by the end of the year what is the remaining margin in your account? If the maintenance margin requirement is 30%, will you receive a margin call? What is the rate of return on your investment under the above scenario?
3. You are bullish on stock Z at $50/share and decide to invest. You have $5,000 of your own to invest and borrow an additional $5,000 from your broker at 8% yearly interest rate. You invest all of this in stock Z. What is your rate of return assuming that stock Z does not pay a dividend if the price of stock Z increases by 10% to $55/share? How far does the price of stock Z have to fall (assuming this happens immediately) for you to get a margin call assuming the maintenance margin is 30%.
The Anberlin Co. had $294,000 in 2011 taxable income. Use the tax rates from Table 2.3. What is the average tax rate? What is the marginal tax rate?
A bond has a $1,000 par value, 20 years to maturity, and a 5% annual coupon and sells for $860. What is its yield to maturity (YTM)?
The constant growth model is sufficiently general to handle the case of a zero growth stock, where the dividend is expected to remain constant over time.
The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). What price will your bond sell for?
The Contrell Company is planning to finance an expansion with convertible preferred stock. Calculate the conversion price if it is set at a 30% premium
William Chris opened a steak house a few years ago with his sister, Ruth. In going through their financial records they found an old amortization schedule that their lender had prepared when they took out a loan to start the business. Not being too f..
Which projects will the firm accept if the payback period is three years? Which projects will the firm accept if the discounted payback period is three years? (Show math) What is the IRR for each of the three projects? What is the MIRR for each of th..
What will your quarterly payment be if you sign up for this mortgage? How much will you pay in interest in your first payment?
Interest Rate Risk. Consider two bonds, a 3-year bond paying an annual coupon of 5% and a 10-year bond also with an annual coupon of 5%. Both currently sell at face value. Now suppose interest rates rise to 10%. (LO6-3) a. What is the new price of th..
When comparing common stock of the same company it is fair to say that all shares, no matter how many classes, are all created with the same equal rights. companies sometimes have two different classes of shares with unequal rights to dividends an..
What is the current price per share of the stock? How many shares of stock must be sold?
What is GKM Ltd.'s contribution to the translation exposure of GKM USA on December 31 using the temporal method?
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