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
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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
New Contribution Margin = New Price per unit – Variable cost per unit =$8.5-$2.5 =$6
8.20 equals $ 86,700. The contribution margin per unit at a retail price of Cr. 6.85 equal 1.95. The required volume will be the result of dividing the profit impact on the contribution margin per unit.
b. The optimal transfer price is $0.99, giving a buy-back price of $0.988, and channel profits of $372.62. However, this is an unrealistic scenario because Ralph’s profits are negative at -$24 and
13. If the selling price is $22 per unit, what is the contribution margin per unit sold?
A company enters into a short futures contract to sell 5,000 bushels of wheat for 250 cents per bushel. The initial margin is $3,000 and the maintenance margin is $2,000. What price change would lead to a margin call? Under what circumstances could $1,500 be withdrawn from the margin account?
1. This is a closed book exam. You may only have pens, pencils , a calculator and one cheat sheet double sided on 8 ½ by 11 paper at your desk.
Assume that next year management wants the company to earn a minimum profit of $162,000. How many units be sold to meet this target profit figure? [3 points]
11. Managers of POM Corp. wish to maximize the long term share price of the firm. Investors are aware of this. In this situation, if the managers of POM announce an equity issue, investors will conclude that the share price is __A1__. Therefore they will __A2__ the shares at the offered price. Anticipating this condition, the managers would __A3__.
b. What would Mrs. Beach have to deposit if she were to use common stock and earned an average rate of return of 11%.
Contribution Margin = (Unit selling price – unit variable cost) / unit selling price = ($9.00 – $2.60) / $9.00 = 0.7111 = 71.111%
d) Calculate the new value per share after the capital structure change. (Hint: use your answers to parts b and c.)
Your required rate of return is 9 percent. Ignoring taxes, what is the value of one share of this stock today?
(d) What will Yabba’s market share have to be for it to generate a profit of $700,000?
The base Capstone Simulation point score is generated as outlined below. You may access your Round and Cumulative score during Team Competition on the CapSim website at Reports →Analysis & Scoring →Analyst Report. This document outlines how the 10-item scoring method will be used. Your grade for the team or Individual Competitions will be simply your total points earned divided by the maximum points earned by a student or team (Individual or Team Competitions) in the same industry (simulation number). Large classes may have two industries organized in them.
The highest dividend tax rate of an investor who could gain from trading to capture the dividend would be 36%.