1. (0.75 pts.) A S100,000 face value T-bill matures in 75 days and has a Bond Eq
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1. (0.75 pts.) A S100,000 face value T-bill matures in 75 days and has a Bond Equivalent Yield (BEY) of 5.57%. What is the current value (price) of the bond? 2. (1 pts) Suppose there are only three stocks in the market and the following information is given: CompanyShares Outstanding 10 million 30 million 20 million Price per Share S60 $40 S50 2.1 (0.25 pts.) What is the weight of Stock A in the price-weighted index? 2.2 (0.75 pts.) Suppose the current divisor is 2.5. If the next day, stock A undergoes a 2-for-1 stock split, what is the new post-split divisor for the price-weighted index? Lecture 3 Questions: 3. (0.75 pts.) Tori purchased 500 shares of Flagler Enterprises stock at a price of $25 a share The initial margin was 60% and the maintenance margin is 35%. After the purchase, the stock price drops to $22. What is the margin now (ignore interest)? Will this trigger a margin call? 4. (0.75 pts) You invested in stock ABC at $50 per share. The purchase was made with 60% margin at 10% annual interest rate on the borrowing. You sold your shares one year later at $60 per share. What is your holding period return? 5. (0.75 pts.) You short sold stock XYZ at $20 per share at an initial margin of 50%; and collected $200,000 sale proceeds. The broker requires maintenance margin of 30%. If the price increases to $25, would it trigger a margin call?Explanation / Answer
1.((face value-price)/price)*365/75=5.57%
=>price=100000/(1+5.57%*75/365)=98868.4305
2.1
In price weighted index, weight is the price
Hence, weight is 60/(60+40+50)=40%
2.2
Price weighted index is unaffected by stock splits
Hence,(60+40+50)/2.5=(30+40+50)/divisor
=>divisor=2
3
Equity would become=500*22-500*25*0.4=6000
Margin=6000/(500*22)=54.54%
As more than maintenance margin, no margin call will be triggerred
P.S.: I am allowed to answer only 4 questions
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