Exam 2: The Investment Process

You purchased a stock for $18.45 a share using 70 percent margin.You sold the stock seven months later for $19.85 a share.You did not receive any dividend income.What was your holding period percentage return on this investment? Ignore trading costs and margin interest.

Which one of the following describes a short position?

Kay plans to retire in two years and wishes to liquidate her account at that time.Kay has a _____ constraint.

Jennifer believes that Northern Wine stock is going to decline in value so she is short selling 1,000 shares at $32 a share.Her initial margin requirement is 70 percent and the maintenance margin is 30 percent.What is the highest the stock price can go before she receives a margin call?

You short sold 500 shares of Jasper stock at $41 a share at an initial margin of 60 percent.What is the highest the stock price can go before you receive a margin call if the maintenance margin is 40 percent?

Robin sold 800 shares of a non-dividend paying stock this morning for a total of $29,440.She had purchased these shares on margin nine months ago at a cost per share of $35.The initial margin requirement on this stock is 60 percent and the maintenance margin is 30 percent.Robin pays 1.2 percent over the call money rate of 4.9 percent.What is her total dollar return on this investment?

The determination of which individual stocks to purchase within a particular asset class is referred to as:

Briefly discuss the difference between strategic and tactical asset allocation.

Which one of the following decisions falls under the category of asset allocation?

Aaron purchased 300 shares of a technology stock for $16.80 a share.The initial margin requirement on this stock is 85 percent and the maintenance margin is 60 percent.What is the lowest the stock price can go before he receives a margin call?

Which one of the following best describes the term "initial margin"?

Tony purchased 100 shares of T-Rex stock for $43 a share.On the same day,Sam also purchased 100 shares of T-Rex stock for $43 a share.Tony paid cash for his purchase while Sam used margin.The initial margin requirement on this stock is 60 percent while the maintenance margin is 40 percent.Both Tony and Sam sold their shares after eight months at a price of $40 a share.The stock pays no dividends.Tony had a holding period percentage return of _____ percent as compared to Sam's _____ percent return.Ignore margin interest and trading costs.

Yvette recently purchased 500 shares of stock at a cost per share of $43.50.The initial margin requirement on this stock is 75 percent and the maintenance margin is 40 percent.The stock is currently valued at $44.75 a share.What is her current margin position? Ignore margin interest.

Today,you are purchasing 100 shares of stock on margin.The purchase price per share is $35.The initial margin requirement is 70 percent and the maintenance margin is 30 percent.The call money rate is 4.5 percent and you are charged 1.6 percent over that rate.What will your rate of return be if you sell your shares one year from now for $37 a share? Ignore dividends.

The maximum loss you can incur on a short sale is:

You purchased 800 shares of stock for $49.20 a share.The initial margin requirement is 65 percent and the maintenance margin is 35 percent.What is the lowest the stock price can go before you receive a margin call?

Donna recently purchased 500 shares of Deltona stock for $33.00 a share.Her broker required a cash payment of $10,725,plus trading costs,for the purchase.What is the initial margin requirement on this particular stock?

Stephen is purchasing 700 shares of KPT,Inc.,stock at a price per share of $28.00.What is the minimum amount the Federal Reserve will require Stephen to pay in cash for this purchase?

Which one of the following is generally true concerning securities held in street name?

Marti purchased 100 shares of Better Foods stock on margin at a price of $49 a share.The initial margin requirement is 60 percent and the maintenance margin is 30 percent.What is the lowest the stock price can go before Marti receives a margin call?