Practice Test Essay Example

Practice Test Essay You are considering the purchase of a $1,000 par value Treasury Bill and observe the following quotes for T-Bills in the market: Ignore transaction costs. Time to Maturity days) Bid Asked . The ask price off T-bill in the secondary market is A. The price at which the dealer in T-bills is willing to sell the bill. B. The price at which the dealer in T-bills is willing to buy the bill. C. Smaller than the bid price of the T-bill. D. The price at which the investor can sell the T-bill. 5. What is the purchase price of the 144-day bill that you face? What would be the effective annual rate of return on your investment if you held 6. The bill until maturity? . What would be the effective annual rate of return on your investment if you bought this bill today and were able to sell it back to a dealer after 28 days, assuming that yields do not change over time? Consider the following 2 stocks in the table and answer the next 3 questions. We will write a custom essay sample on Practice Test specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Practice Test specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Practice Test specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Note: Initial Price (O) is the current price. Final Price (1) is the share price at the end of the first period, and Final Price (2) is the share price at the end of the second period. Stock Initial Price (O) Final Price (1) Final pence (2) 35 42 first period, that is, from initial period (O) to the first period (1) c. 3% 9. Suppose stock A has 20 million shares, stock B has 1 million shares outstanding. Compute the rate of return on a market capitalization-weighted index of the two stocks for the first period. D. 19% 10. In the second period, stock B splits 2:1 (two-for-one), I. . , its price is halved (from $88 in period 1 to $44 in period 2) while shares outstanding doubled. What must happen to the divisor for the price-weighted index for the second period? A. The divisor must not change. B. The divisor must decrease to 1. 32 C. The divisor must decrease to 1. 23 D. The divisor must decrease to 0. 875 11. You purchased a share of stock for $20. One year later you received $1 as di vidend and sold the share for $29. What was your holding period return? A. 45% 12. An investor purchased 100 shares of stock at $100 per share on 60% margin. Suppose the maintenance margin is 30%, at what price does the investor get a margin call? A. $58. 35 B. $57. 05 c. $58. 14 D. $57. 14 13. Regarding the previous question, if the stock price declines to $70 per share, whats the return to the investors equity? What if the stock rises to $1 50 per share? A. And -83% B. And -75% C. -50% and 83% D. -30% and 75% 14. Which of the following statements is INCORRECT about short sale A. A short sale may only take place if the last recorded price was an optic. B. Proceeds from short sales must be kept on account with the broker.