Investments Test #1

3.99

A T-bill with face value $10,000 and 92 days to maturity is selling at a bank discount ask yield of 3.9%. What is its bond equivalent yield?

d

An investor buys a T-bill at a bank discount quote of 4.80 with 90 days to maturity. The investor's actual annual rate of return on this investment is _____. a) 5.10% b) 4.86% c) 4.79% d) 4.93%

b

Lanni sells the shares of stock for $25 per share and uses part of the proceeds to payoff the bank loan. The loan is _____________ in the transaction, since it is retired when paid. a) created b) destroyed

9900.33

A T-bill with face value $10,000 and 92 days to maturity is selling at a bank discount ask yield of 3.9%. What is the price of the bill?

2.93

A closed-end fund starts the year with a net asset value of $23. By year-end, NAV equals $24.20. At the beginning of the year, the fund is selling at a 4% premium to NAV. By the end of the year, the fund is selling at a 9% discount to NAV. The fund paid year-end distributions of income and capital gains of $2.60. What is the rate of return to an investor in the fund during the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Rate of return =

16.52

A closed-end fund starts the year with a net asset value of $23. By year-end, NAV equals $24.20. At the beginning of the year, the fund is selling at a 4% premium to NAV. By the end of the year, the fund is selling at a 9% discount to NAV. The fund paid year-end distributions of income and capital gains of $2.60. What would have been the rate of return to an investor who held the same securities as the fund manager during the year? (Round your answer to 2 decimal places.) Rate of return =

12.08

A municipal bond carries a coupon rate of 7.25% and is trading at par. What would be the equivalent taxable yield of this bond to a taxpayer in a 40% tax bracket? (Round your answer to 2 decimal places.) Equivalent tax yield = _______%

18.166

Consider a mutual fund with $201 million in assets at the start of the year and with 12 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $3 million. The stocks included in the fund's portfolio increase in price by 9%, but no securities are sold, and there are no capital gains distributions. The fund charges 12b-1 fees of 0.50%, which are deducted from portfolio assets at year-end. What is net asset value at the start and end of the year? (Enter your answers in dollars rounded to 3 decimal places.) Net Asset Value (End of the year) =

16.75

Consider a mutual fund with $201 million in assets at the start of the year and with 12 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $3 million. The stocks included in the fund's portfolio increase in price by 9%, but no securities are sold, and there are no capital gains distributions. The fund charges 12b-1 fees of 0.50%, which are deducted from portfolio assets at year-end. What is net asset value at the start and end of the year? (Enter your answers in dollars rounded to 3 decimal places.) Net Asset Value (Start of the year) =

9.95

Consider a mutual fund with $201 million in assets at the start of the year and with 12 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $3 million. The stocks included in the fund's portfolio increase in price by 9%, but no securities are sold, and there are no capital gains distributions. The fund charges 12b-1 fees of 0.50%, which are deducted from portfolio assets at year-end. What is the rate of return for an investor in the fund? (Use rounded "Net Asset Value". Round your answer to 2 decimal places.) ROR =

4.4

Find the equivalent taxable yield of the municipal bond for tax brackets of zero, 10%, 20%, and 30%, if it offers a yield of 4.40%. (Round your answers to 2 decimal places.) a. Zero ___%

4.89

Find the equivalent taxable yield of the municipal bond for tax brackets of zero, 10%, 20%, and 30%, if it offers a yield of 4.40%. (Round your answers to 2 decimal places.) b. 10% ___%

5.5

Find the equivalent taxable yield of the municipal bond for tax brackets of zero, 10%, 20%, and 30%, if it offers a yield of 4.40%. (Round your answers to 2 decimal places.) c. 20% ___%

6.29

Find the equivalent taxable yield of the municipal bond for tax brackets of zero, 10%, 20%, and 30%, if it offers a yield of 4.40%. (Round your answers to 2 decimal places.) d. 30% ___%

a

Lanni sells the shares of stock for $25 per share and uses part of the proceeds to payoff the bank loan. In paying off the IOU with $50,000, Lanni is exchanging ______________. a) financial asset b) financial liability c) real asset d) real liability

a

Lanni sells the shares of stock for $25 per share and uses part of the proceeds to payoff the bank loan. In selling 5,000 shares of stock for $125,000, Lanni is exchanging one _____________ for another a) financial asset b) financial liability c) real asset d) real liability

a

Lanni sells the software product to Microsoft, which will market it to the public under the Microsoft name. Lanni accepts payment in the form of 5,000 shares of Microsoft stock. A new financial asset is ________________ if Microsoft issues new shares. a) created b) destroyed

a

Lanni sells the software product to Microsoft, which will market it to the public under the Microsoft name. Lanni accepts payment in the form of 5,000 shares of Microsoft stock. Lanni receives a _________________ , 5,000 shares of Microsoft stock. a) financial asset b) financial liability c) real asset d) real liability

c

Lanni sells the software product to Microsoft, which will market it to the public under the Microsoft name. Lanni accepts payment in the form of 5,000 shares of Microsoft stock. Lanni sells the software, which is a ______________ , to Microsoft. a) financial asset b) financial liability c) real asset d) real liability

a

Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising to pay back the loan over three years. A new financial asset ______________ is Lanni's promissory note held by the bank. a) created b) destroyed

a

Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising to pay back the loan over three years. Lanni's IOU is the bank's a) financial asset b) financial liability c) real asset d) real liability

b

Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising to pay back the loan over three years. The bank loan is a a) financial asset b) financial liability c) real asset d) real liability

a

Lanni takes out a bank loan. It receives $50,000 in cash and signs a note promising to pay back the loan over three years. The cash Lanni receives is a a) financial asset b) financial liability c) real asset d) real liability

c

Lanni uses the cash from the bank plus $20,000 of its own funds to finance the development of new financial planning software. Lanni gets a ______________ , the completed software. a) financial asset b) financial liability c) real asset d) real liability

a

Lanni uses the cash from the bank plus $20,000 of its own funds to finance the development of new financial planning software. The cash paid by Lanni is the transfer of a _________________to the software developer. a) financial asset b) financial liability c) real asset d) real liability

106.67

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.85%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.15%. Assume the rate of return on both funds' portfolios (before any fees) is 9% per year. How much will an investment of $100 in each fund grow to after 1 year? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Economy Fund =

107.15

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.85%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.15%. Assume the rate of return on both funds' portfolios (before any fees) is 9% per year. How much will an investment of $100 in each fund grow to after 1 year? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Loaded-Up Fund =

321.24

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.85%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.15%. Assume the rate of return on both funds' portfolios (before any fees) is 9% per year. How much will an investment of $100 in each fund grow to after 14 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Economy Fund =

262.96

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.85%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.15%. Assume the rate of return on both funds' portfolios (before any fees) is 9% per year. How much will an investment of $100 in each fund grow to after 14 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Loaded-Up Fund =

114.81

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.85%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.15%. Assume the rate of return on both funds' portfolios (before any fees) is 9% per year. How much will an investment of $100 in each fund grow to after 2 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Loaded-Up Fund =

116.11

Loaded-Up Fund charges a 12b-1 fee of 1% and maintains an expense ratio of 0.85%. Economy Fund charges a front-end load of 2%, but has no 12b-1 fee and an expense ratio of 0.15%. Assume the rate of return on both funds' portfolios (before any fees) is 9% per year. How much will an investment of $100 in each fund grow to after 2 years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Economy Fund =

a

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $115 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $115 to $124.20, and the stock has paid a dividend of $19.00 per share. If the maintenance margin requirement is 30%, will Old Economy receive a margin call? a) Yes b) No

23.59

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $115 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $115 to $124.20, and the stock has paid a dividend of $19.00 per share. What is the margin on the short position? (Round your answer to 2 decimal places.) Short margin =

-49.04

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $115 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $115 to $124.20, and the stock has paid a dividend of $19.00 per share. What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) ROR =

29300

Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $115 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $115 to $124.20, and the stock has paid a dividend of $19.00 per share. What is the remaining margin in the account? Remaining margin =

a

The Investments Fund sells Class A shares with a front-end load of 6% and Class B shares with 12b-1 fees of .5% annually as well as back-end load fees that start at 5% and fall by 1% for each full year the investor holds the portfolio (until the fifth year). Assume the portfolio rate of return net of operating expenses is 10% annually. If you plan to sell the fund after four years, are Class A or Class B shares the better choice for you? a) Class A b) Class B c) Neither

a

The Investments Fund sells Class A shares with a front-end load of 6% and Class B shares with 12b-1 fees of .5% annually as well as back-end load fees that start at 5% and fall by 1% for each full year the investor holds the portfolio (until the fifth year). Assume the portfolio rate of return net of operating expenses is 10% annually. What if you plan to sell after 15 years? a) Class A b) Class B c) Neither

55.38

You are bearish on Telecom and decide to sell short 100 shares at the current market price of $48 per share. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.) Stock price reaches =

2400

You are bearish on Telecom and decide to sell short 100 shares at the current market price of $48 per share. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Initial margin =

7.14

You are bullish on Telecom stock. The current market price is $10 per share, and you have $1,000 of your own to invest. You borrow an additional $1,000 from your broker at an interest rate of 8.5% per year and invest $2,000 in the stock. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. (Round your answer to 2 decimal places.) Stock price falls below =

11.5%

You are bullish on Telecom stock. The current market price is $10 per share, and you have $1,000 of your own to invest. You borrow an additional $1,000 from your broker at an interest rate of 8.5% per year and invest $2,000 in the stock. What will be your rate of return if the price of Telecom stock goes up by 10% during the next year? (Ignore the expected dividend.) (Round your answer to 2 decimal places.) Rate of return =