Use the following information to solve for SIX QUESTIONS BELOW. Therefore, questions (#16 - #21) will be based on this same information. DO NOT ROUND YOUR INTERIM CALCULATIONS FOR ACCURATE RESULTS. You just short sold 400 shares of ABD stock for $12,000. The sale was a short sale with an initial margin requirement of 70%. The maintenance margin is 40%. 8 months later, Some positive news concerning the company was released and the stock price jumped this morning to $38 per share. QUESTION #6. What is your EAR (Effective annual rate)? WRITE YOUR ANSWER IN A PERCENTAGE FORMAT UP UNTIL TWO DECIMALS WITHOUT THE % SIGN. (for example, 10.40% should be written as 10.40 rather than 0.1040)

Use the following information to solve for SIX QUESTIONS BELOW. Therefore, questions (#16 - #21) will be based on this same information. DO NOT ROUND YOUR INTERIM CALCULATIONS FOR ACCURATE RESULTS. You just short sold 400 shares of ABD stock for $12,000. The sale was a short sale with an initial margin requirement of 70%. The maintenance margin is 40%. 8 months later, Some positive news concerning the company was released and the stock price jumped this morning to $38 per share. QUESTION #6. What is your EAR (Effective annual rate)? WRITE YOUR ANSWER IN A PERCENTAGE FORMAT UP UNTIL TWO DECIMALS WITHOUT THE % SIGN. (for example, 10.40% should be written as 10.40 rather than 0.1040)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Beasley Ball Bearings paid a $4 dividend last year. The dividend is expected to grow at a constant rate of 5 percent over the next four years. The required rate of return is 12 percent (this will also serve as the discount rate in this problem). Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. e. Compute the current value of the stock. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) f. Use the formula given below to show that it will provide approximately the same answer as part e. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) P0 = D1 Ke − g g. If current EPS were equal to $5.51 and the P/E ratio is 20% higher than the industry average of 10, what would the stock price be? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) h. By what dollar amount is the stock price…
Enterprise Storage Company has 420,000 shares of cumulative preferred stock outstanding, which has a stated dividend of $5.75. It is six years in arrears in its dividend payments. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. How much in total dollars is the company behind in its payments? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).) Dividend in arrears b. The firm proposes to offer new common stock to the preferred stockholders to wipe out the deficit. The common stock will pay the following dividends over the next four years: D1 D2 D3 D4 $1.05 1.15 1.25 1.35 The company anticipates earnings per share after four years will be $4.07 with a P/E ratio of 14. The common stock will be valued as the present value of future dividends plus the present value of the future stock price after four years. The discount rate used by the investment banker is 11…
You believe that Rose, Incorporated, stock is going to fall and you've decided to sell 900 shares short. If the current share price is $52, construct the equity account balance sheet for this trade. Assume the initial margin is 65 percent. Note: Do not round intermediate calculations. Input all amounts as positive values. Assets Proceeds from sale Initial margin deposit Total Liabilities and account equity Short position Account equity Total
XYZ Inc., has an odd dividend policy. The company has just paid a dividend of $11.00 per share and has announced that it will increase the dividend by $9.00 per share for each of the next four years, and then never pay another dividend. If you require a return of 16 percent on the company’s stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Yesterday at the market close, the stock of Kevin Spellman, Inc. was trading at $100 per share and there were 500,000 shares outstanding. This morning before the market opened, Kevin Spellman, Inc. announced that it was doing a 5:1 stock split. Under the efficient market hypothesis and with no new information, what will be the new stock price in dollars per share?
Skyler Industries's preferred stock currently sells for $43 per share. The stock pays an annual dividend of $2.95 per share. The cost of preferred stock, Rp, is ____%. Round your final answer to 2 decimal places (example: enter 12.34 for 12.34%), but do not round any intermediate work in the process. [Note: Correct answer feedback may show more than 2 decimal places, but you should still follow instructions above for entering your answers.]
The Jackson-Timberlake Wardrobe Co. just paid a dividend of $1.20 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. Investors require a return of 10 percent on the company's stock. a. What is the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What will the stock price be in 3 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What will the stock price be in 10 years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
In you cash account, you buy 100 shares of XYZ Corporation at a price of $10 per share. Two months later, XYZ pays a dividend $0.21 per share. You sell all 100 shares of XYZ three months later at a price of $12 per share. If you wanted to lever up the returns of this trade, you could have executed it in your _____ account. A) cash B) margin C) brokerage D) bank
Having heard about IPO underpricing, I put in an order to my broker for 1, 120 shares of every IPO he can get for me. After 3 months, my investment record is as follows: IPO Shares Allocated to Me Price per Share Initial Return A 620 $ 10 6 % В 320 20 14 C 1, 1208-3D0 12 23 a. What is the average underpricing in dollars of this sample of IPOs? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the average initial return on my "portfolio" of shares purchased from the four IPOs that I bid on? When calculating this average initial return, remember to weight by the amount of money invested in each issue.
Enterprise Storage Company has 450,000 shares of cumulative preferred stock outstanding, which has a stated dividend of $8.75. It is six years in arrears in its dividend payments. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.a. How much in total dollars is the company behind in its payments? (Do not round intermediate calculations. Input your answer in dollars, not millions (e.g., $1,234,000).) Dividend in arrears b. The firm proposes to offer new common stock to the preferred stockholders to wipe out the deficit. The common stock will pay the following dividends over the next four years: D1 $ 1.20 D2 1.30 D3 1.40 D4 1.50 The company anticipates earnings per share after four years will be $4.10 with a P/E ratio of 11.The common stock will be valued as the present value of future dividends plus the present value of the future stock price…
(please correct answer this question) Lamonica Motors just reported earnings per share of $2.00. The stock has a price earnings ratio of 40, so the stocks current price is $80 per share. Analysts expect that one year from now the company will have an EPS of $2.40, and it will pay its first dividend of $1.00 per share. The stock has a required return of 10 percent. What price earnings ratio must the stock have one year from now so that investors realize their expected return?
You are very optimistic about the personal computer industry, so you buy 200 shares of Microtech Inc. at $45 per share. You are very pessimistic about the machine tool industry, so you sell short 300 shares of King Tools Corporation at $55. Each transaction requires a 40 percent margin balance. a. What is the initial equity in your account? b. Assume the price of each stock is as follows for the next three months (month-end). Compute the equity balance in your account for each month: Month Microtech Inc. King Tools Corp. October $51 $48 November 39 62 December 37 40

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