Investment Analysis Test 1

A stock sold for 25$ at the beginning of the year. The end of the year stock price was $25.70. What is the amount of the annual dividend if the total return for the year was 7.7%?

$25 x 0.077 = $1.93 $25 + $1.93 = $26.93 $26.93 - $25.70 = $1.23 Dividend = $1.23 per share

Theresa has margin account with a 60% initial margin requirement and a 35 percent maintenance margin. What is the maximum dollar amount of stock she can purchase if her cash balance in the account is $35,300?

$35,300 / 0.6 = $58,333.33

Elizabeth short sold 400 shares of stock at $72 a share. One month later, she covered the short at a price of $68 a share. What was her total dollar return on this investment?

$72 - $68 = $4 per share $4 x 400 shares = $1,600

Over the past four years, Hi-Tech Development stock returned 35.2, 38.8,18.4 and -32.3 percent annually. What is the arithmetic average return?

(35.2 + 38.8 + 18.4 + -32.3)/ 4 = 15.025 %

Martin has an investment account with William, who is a broker with City Brokerage. Martin believes that William has mishandled his account by churning it. If he files a complaint against William seeking compensation, the case will most likely be decided by:

An arbitration panel: the securities industry makes you sign forms before you invest stating that all disputes should be handled by an arbitration panel.

Which one of the following should be used to compare the overall performance of three different investments?

Effective annual return

The average compound return earned per year over a multi-year period is called the:

Geometric Return

A brokerage account in which purchases can be made using credit is referred to as which type of account?

Margin Account

Alfonso purchased 600 shares of Crosswinds, Inc., stock on 60% margin when the stock was selling for $37 a share. The stock is currently selling for $32 a share. What is his current equity position?

Margin loan = 600 x $37 x (1-0.6) = $8,880 Current Equity = (600 x $32) - $8,880 = $10,320

A company that owns income-producing real estate such as an apartment complex or retail shopping center is called a(n):

Real Estate Investment Trust (REIT)

The determination of which individual stocks to purchase within a particular asset class is referred to as:

Security Selection: The investor has already decided how much of their assets they want in equities. Now they are going to the next and selecting securities.

Which one of the following had the greatest volatility of returns for the period of 1926-2012?

Small Company Stocks

Scott purchased 200 shares of Frozen Foods stock for $48 a share. Four months later he received a dividend of $0.22 a share and also sold the shares for $42 each. What was his annualized rate of return on this investment?

Sold for $6 loss and received $0.22 dividend so: -$6 + $0.22 = -$5.78 -$5.78 / $48 =- .1204 1 - .1204 = .8796 .8796 ^ 3 = .6805 1 - .6805 = .3195 or 31.95% annualized rate of return

Joanne invested $15,000 six years ago. Her arithmetic average return on this investment is 8.72%, and her geometric average return is 8.50%. What is Joanne's portfolio worth today?

USE GEOMETRIC RETURN. 8.5% 108.5% 108.5% ^ 6 years = 1.6315 $15,000 x 1.6315 = $24,472