ch17 practice questions

Chapter 11, Question 2

Question 6 You are interested in short selling 200 shares of Queen Company Limited. The initial margin is 55% and the maintenance margin is 35%. You sell the shares at $xx per share (xx is the last two digits of your student ID number, if the last two digits are 00, use 100). i) ii) iii) How much money do you have to add to your account and how much money is in your account in total? At what price will you get a margin call? If the price of the stock immediately increased by 30%, and you bought it back at that price, how much you lose (in $) and what would be the rate of return (in %) on your investment (assume no fees or interest costs)?

chapter 15 #7 Assume that an investor has $10,000 to invest. Stock can be purchased at $20 per share (500 shares can be purchased). Call options to purchase 100 shares at a price of $25 can be purchased for $500 (options to produce 2,000 shares can be purchased). Compare the change in the investor’s wealth from buying the stock and buying the options if the stock price at the expiration of the option is: $35. $24.

which one is correct? QUESTION 11 Exhibit 1.7 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)   You purchased 100 shares of GE common stock on January 1, for $29 a share. A year later you received $1.25 in dividends per share and you sold it for $28 a share.   Refer to Exhibit 1.7. Calculate your holding period return (HPR) for this investment in GE stock.   a. 0.9655   b. 1.0973   c. 1.0804   d. 1.0086   e. 1.0357

Accounting question

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General accounting question

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Question list Question 3 Question 4 O Question 5 K Suppose that Tesla stock is currently selling at $261.29 per share. For each of the following situations (ignoring brokerage commissions), calculate the gain or loss that Olivia Crowe realizes if she makes a 100-share transaction. (Enter all losses as negative numbers.) a. She sells short and repurchases the borrowed shares at $304.14 per share. b. She takes a long position and sells the stock at $304.14 per share. c. She sells short and repurchases the borrowed shares at $254.45 per share. d. She takes a long position and sells the stock at $254.45 per share. a. If she sells short and repurchases the borrowed shares at $304.14 per share, the gain or loss she realizes is $ (Enter a loss as a negative number and round to the nearest cent.)

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Question 2.         There is an option involved strategy named “Ratio call writing”. It is the strategy when one owns a certain number of shares of the underlying stock and simultaneously sells calls against more shares than one owns. Therefore, there is a ratio of calls written to stock owned. The most common ratio is the 2:1. For example a 2:1 ratio can be established by buying 100 shares of ABC at $49 per share and selling 200 ABC October 50 calls at $6. Part I. What is the profit/loss of the above “ratio call writing” strategy when stock price at October expiration is $37, $45 and $63, respectively? Part II. For the above strategy, what is the expected maximum profit and when can the maximum profit be achieved? What is the expected maximum loss and when are you likely to suffer the loss? Would the strategy break even at October expiration? At what range of stock prices, do you expect to make profit? Part III. The following is a common objection to the strategy “ratio call writing”:…

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Saved ped Suppose you own 60,000 shares of common stock in a firm with 3 million total shares outstanding. The firm announces a plan to sell an additional 1.2 million shares through a rights offering. The market value of the stock is $35 before the rights offering and the new shares are being offered to existing shareholders at a $5 discount. a. If you exercise your preemptive rights, how many of the new shares can you purchase? b. What is the market value of the stock after the rights offering? (Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) c-1. What is your total investment in the firm after the rights offering? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) c-2. If you exercise your preemptive right how many original shares and how many new shares do you have? d-1. If you decide not to exercise your preemptive rights, what is your investment in the firm after the rights offering? (Do not…

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Wellington Jumbo Crab’s stock currently sells for $100 per share. Last week the firm issued rights to raise new equity. To purchase a new share, a stockholder must remit $20 and three rights. What is the price of one right?  Group of answer choices $60 $40 $20 $80

FIN 1 ABC Trading wants to raise equity to fund an acquisition of a small company (XYZ). ABC is considering two choices: (i) using an underwriting syndicate, (ii) a rights offering. The price of ABC stock is $60 and there are 250 million shares outstanding.   (a) If ABC agrees to pay 3% to an underwriter to issue the stock, what are the net proceeds to the company if it sells 20 million shares to the public for $60 each?   (b) ABC issues a rights offer to its existing stockholders that lets them purchase stock at the price of $58 each. (Note: stockholders will receive one right for each 12.5 shares they own, so only 20 million shares can be issued). What are the net proceeds to the company if it sells 20 million shares using the rights offering?   (c) What is the market value of the firm in (a), (b) (ignoring information effects)?   (d) What is the expected information effect from the company announcing it is issuing equity to fund acquisitions?