Chapter 2
19. Consider the three stocks in the following table. P t represents price at time t, and Q t represents shares outstanding at time t. Stock C splits two-for-one in the last period. (LO 2-2)
P0 Q0 P1 Q1 P2 Q2
A 90 100 95 100 95 100
B 50 200 45 200 45 200
C 100 200 110 200 55 400 a. Calculate the rate of return on a price-weighted index of the three stocks for the first period ( t 5 0 to t 5 1). b. What must happen to the divisor for the price-weighted index in year 2? c. Calculate the rate of return of the price-weighted index for the second period ( t 5 1 to t 5 2).
a. At t = 0, the value of the index is: ($90 + $50 + $100)/3 = 80 At t = 1, the value of the index is: ($95 + $45 + $110)/3 =
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The last trade in the stock occurred at a price of $50. (LO 3-3)
Limit Buy Orders Limit Sell Orders
Price Shares Price Shares
$49.75 500 $50.25 100
49.50 800 51.50 100
49.25 500 54.75 300
49.00 200 58.25 100
48.50 600 a. If a market buy order for 100 shares comes in, at what price will it be filled? b. At what price would the next market buy order be filled? c. If you were a security dealer, would you want to increase or decrease your inventory of this stock? a. The market-buy order will be filled at $50.25, the best price of limit-sell orders in the book.
b. The next market-buy order will be filled at $51.50, the next-best limit-sell order price.
c. As a security dealer, you would want to increase your inventory. There is considerable buying demand at prices just below $50, indicating that downside risk is limited. In contrast, limit-sell orders are sparse, indicating that a moderate buy order could result in a substantial price increase.
Chapter 4
15. The Closed Fund is a closed-end investment company with a portfolio currently worth
$200 million. It has liabilities of $3 million and 5 million shares outstanding. (LO 4-3) a. What is the NAV of the fund? b. If the fund sells for $36 per share, what is its premium or discount as a percent of NAV?
a. NAV =
= = $39.40
b. Premium (or discount) = = = –0.0863 = –8.63%
The fund sells at an 8.63% discount from NAV.
18.
2. a. According to the simulation spreadsheet, 4 hours of investment in creation maximizes daily profit at $371.33.
a.) If you were to sell that same amount of stock in a few years at $55.12 per
c. Determine the two product numbers with the largest unit selling prices for subsequent follow-up to verify the unit selling prices.
Q5. HOW MANY SHARES OF CONOCO CLASS B COMMON STOCK WILL I RECEIVE FOR EACH
3. They charged a higher than fair price in the Secondary Market. They sold the issue slowly in order to maintain the premium.
D0 = (dividend yield) × (value of the index) = 0.0615 × $865 = $53.20 . (21)
a. The company wouldn’t produce replicas and change their business model (sales are still increasing roughly 20% each year)
Inc. reports net income of $120,000 and pays a cash dividend of $45,000. The balance in
How would your answer to above change if purchase prices for Dow Chemical’s inventories are expected to increase by approximately 50% in fiscal year 2013?
B. The firm would stand to gain much additional revenue if its competitors did not follow suit by raising their prices.
85. Which of the following is considered a good price judgment by the end of the exercise?
Break-even Dollar Volume = Total Fixed Costs / Contribution Margin = $525,000 / 0.7111 = $738,282.40
D. there is no way to determine what has happened to supply and demand with this information
B. Why might the overall risk of JCPenney decrease or increase as a result of its recent global expansion?
Market value proportions of: Debt = $1,147,200 / $4,897,200 = 23.4% Pref. Share = $1,250,000 / $4,897,200 = 25.5% Common equity = $2,500,000 / $4,897,200 = 51.1%