Description

FIN 4305 Test

1. The price an individual investor will pay to purchase a stock in the OTC market is the bid
2. Rights offerings help avoid dilution of ownership for existing common
3. One goal of secondary markets is to raise cash for
4. Wilson just placed an order with his broker to purchase 500 of GE’s outstanding shares. This purchase will occur in which one of the following markets?
5. ABC is a publicly-traded firm with 250,000 shares of stock outstanding. If the firm issues an additional 10,000 shares, those shares will be referred to as a primary market transaction.
6. Kayla invested $3,000 and purchased shares of a German corporation when the exchange rate was $1.00 = .70 After six months, she sold all of the shares for 3,180 euros, when the exchange rate was $1.00 = .65 euros. No dividends were paid during the time Kayla owned the shares of stock. What is Kayla’s percentage return on this investment in terms of euros? Round intermediate steps to four decimals and enter your answer in decimal format (EX: .XXXX)
7. You decide to invest in an Australian stock with cash flows demoninated in Australian dollars (A$). At the time of purchase, the stock traded at A$45/share and the exchange rate was A$1.5/US$. Find your rate of return (in US dollars) if the stock trades for A$30 and the exchange rate is A$1.2/US$ when you close your
8. The NYSE is a dealer
9. Initial margin requirements are determined by the
10. The following table shows deal quotes for two. Suppose that on a given day, you sold 500 shares of Stock A to your broker and purchased 300 shares of Stock B from your broker. Which of the following best describes the dollar change in the value of your account based on your transactions?
11. You purchased $50,000 worth of stock in a Mexican corporation when the exchange rate was 10 pesos per dollar and the share price was 25 During the time you held the stock, you received a dividend of 8 pesos per share, which you convert back to dollars at a rate of $.065/peso. After a year, you sold all your stock when the exchange rate was $1.00 = 16 pesos and the share price was 20 pesos. Find your return in terms of dollars. Round intermediate steps and your final answer to four decimals. Do not enter the dollar sign when inputting your answer.
12. In the over the counter market, trades are executed by a dealer bringing buyers and sellers
13. Designated market makers manage the auction process in broker
14. In a firm commitment underwriting process, investment bankers act as intermediates between the issuer and potential
15. You feel Delta Industries’ stock will decline, so you short 400 shares at an initial margin of 60 percent on 12/1. Your broker charges you an annual rate of 6% for borrowed Delta trades at $37/share the day you created your short position. If the maintenance margin is 30 percent, at what share price will you receive a margin call?
16. What is your actual margin if the stock trades at $35/share on 12/2?
17. You closed your margin account four months after opening it. What is your return on invested capital if Delta trades for $42 when you close the account?
18. Which one of the following statements is correct?
19. Suppose you purchase 1,500 shares of stock at $75 per share with an initial cash investment of $50,000. The call money rate is 5 percent and you are charged a 5 percent premium over this rate. Calculate your return on invested capital one year later if the share price is $83.
20. Suppose instead you had simply purchased $50,000 of stock with no What would have been your rate of return?
21. PQU stock sells for $59 per share, and you’ve decided to purchase as many shares as you possibly You have $39,000 available to invest. What is the maximum number of shares you can buy if the initial margin is 60 percent? Round your final answer to the nearest whole share.
22. You buy 700 shares of stock at a price of $96 and an initial margin of 55 If the maintenance margin is 30 percent, at what price will you receive a margin call?
23. The stock of Flop Industries is trading at $45. You feel the stock price will decline, so you short 600 shares at an initial margin of 75 percent. The maintenance margin is 45 percent and your broker charges a 5% annual rate on borrowed Find your total deposit with your broker.
24. Will you receive a margin call if the stock climbs to $55 the day after you open your position?
25. Find your return on invested capital if you close your position after 9 months and the stock is trading at $48.5.