Stock Market and Initial Margin

Topics: Stock market, Stock, Short Pages: 5 (810 words) Published: October 6, 2013
5513 FINS investment and portfolio selection 2012 past paper This is a closed-book exam. You must remain in the room when you write your examination. You may not refer to any books, notes, or other material, but you may use a calculator (but not a “programmable” one). Look over the entire exam before you start. There is a total of 105 points (+ 6 bonus points)

1.Firms that specialize in helping companies raise capital by selling securities are called ________.
A) commercial banks
B) investment banks
C) savings banks
D) credit unions
E) all of the above.
2.Commercial paper is a short-term security issued by ________ to raise funds. A) the Federal Reserve Bank
B) commercial banks
C) large, well-known companies
D) the New York Stock Exchange
E) state and local governments
3.Which of the following is true of the Dow Jones Industrial Average? A) It is a value-weighted average of 30 large industrial stocks. B) It is a price-weighted average of 30 large industrial stocks. C) The divisor must be adjusted for stock splits.

D) A and C.
E) B and C.
4.Federally sponsored agency debt
A) is legally insured by the U. S. Treasury.
B) would probably be backed by the U. S. Treasury in the event of a near-default. C) has a small positive yield spread relative to U. S. Treasuries. D) B and C.
E) A and C.
5.Suppose an investor is considering a corporate bond with a 7.17% before-tax yield and a municipal bond with a 5.93% before-tax yield. At what marginal tax rate would the investor be indifferent between investing in the corporate and investing in the muni? A) 15.4%

B) 23.7%
C) 39.5%
D) 17.3%
E) 12.4%
6.In calculating the Standard and Poor's stock price indices, the adjustment for stock split occurs: A) by adjusting the divisor.
B) automatically.
C) by adjusting the numerator.
D) quarterly, on the last trading day of each quarter.
E) none of the above.
7.You sold short 200 shares of common stock at $60 per share. The initial margin is 60%. Your initial investment was
A) $4,800.
B) $12,000.
C) $5,600.
D) $7,200.
E) none of the above.
8.You purchased 100 shares of ABC common stock on margin at $70 per share. Assume the initial margin is 50% and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin.

A) $21
B) $50
C) $49
D) $80
E) none of the above
9.You purchased 300 shares of common stock on margin for $60 per share. The initial margin is 60% and the stock pays no dividend. What would your rate of return be if you sell the stock at $45 per share? Ignore interest on margin.

A) 25%
B) -33%
C) 44%
D) -42%
E) –54%
10. Assume you sold short 100 shares of common stock at $50 per share. The initial margin is 60%. What would be the maintenance margin if a margin call is made at a stock price of $60?
A) 40%
B) 33%
C) 35%
D) 25%
E) none of the above
11. You sell short 100 shares of Loser Co. at a market price of $45 per share. Your maximum possible loss is
A) $4500
B) unlimited
C) zero
D) $9000
E) cannot tell from the information given
12. Pinnacle Fund had year-end assets of $825,000,000 and liabilities of $25,000,000. If Pinnacle's NAV was $32.18, how many shares must have been held in the fund? A) 21,619,346,92
B) 22,930,546.28
C) 24,860,161.59
D) 25,693,645.25
E) None of the above.
13. Management fees and other expenses of mutual funds may include 3
A) front-end loads.
B) back-end loads.
C) 12b-1 charges.
D) A and B only.
E) A, B and C.
14. The Yachtsman Fund had NAV per share of $36.12 on January 1, 2005. On December 31 of the same year the fund's NAV was $39.71. Income distributions were $0.64 and the fund had capital gain distributions of $1.13. Without considering taxes and transactions costs, what rate of return did an investor receive on the Yachtsman Fund last year?

A) 22.92%
B) 17.68%
C) 14.39%
D) 18.52%
E) 14.84%
15. Which of the following characteristics apply to unit...
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