Reference no: EM133114793
(1) A call option with a strike price of $55 can be bought for $4. What will be your net profit if you sell the call and the stock price is $52 when the call expires?
(2) If a corporation pays a dividend of $5, the rate of return is 12%, and dividends grow at 2% per year, what is the market price of this stock per share?
(3) If a mutual fund has $165 million in assets, $10 million in accrued liabilities, and 2.5 million shares outstanding, what is the net asset value (NAV) of a share?
(4) You purchase a mutual fund for $17.23. The fund's NAV is $17.00. (The load fee was $0.23.) The NAV subsequently rises to $21.56 and you redeem the shares. What is the rate of return on your investment?
(5) A $1,000 bond has a 5 percent coupon and matures in ten years. What is the price of the bond if the comparable interest rate is 7 percent?
(6) A $100 perpetual preferred stock pays a $5 annual dividend. What should be the price of the
stock if the yield on other preferred stocks is 8 percent?
(7) Andrew has a margin account and deposits $100,000. Assuming the prevailing margin requirement is 40%, commissions are ignored, and the Flower Shoe Company is selling at $70 per share:
(i) What is Lauren's profit (loss) if the price of Gentry's stock rises to $90?
(ii) How many shares can Lauren purchase using the maximum allowable margin?
(iii) If the maintenance margin is 30 percent, to what price can Flower Shoe fall before Andrew will receive a margin call?