Q&A Hero

Q: Which one of the following statements related to common stock is correct? A. Corporations are required to pay annual dividends to its common stockholders. B. Corporations have the right to discontinue paying dividends. C. Corporations pay dividends at the discretion of the firm's president. D. Common stock is a form of corporate debt. E. Common stock has a pre-defined liquidation value.

Q: Which one of the following represents a residual ownership interest in the issuer? A. U.S. Treasury bond B. corporate bond C. municipal bond D. preferred stock E. common stock

Q: Use the following bond quotes to answer this question:What is the current price of a $1,000 face value Alpha Industrial bond?A. $986.67B. $991.04C. $994.02D. $998.23E. $1,000.00

Q: Use the following bond quotes to answer this question:What was yesterday's closing price on the Beta Movers bond?A. $1,020.13B. $1,033.54C. $1,044.07D. $1,053.54E. $1,054.07

Q: Use the following bond quotes to answer this question:The Alpha Industrial bonds pay an annual interest payment equal to 5.875 percent of:A. $999.90.B. $1,000.00.C. $1,000.13.D. $1,033.54.E. $1,034.07.

Q: Bond trades are reported:A. on a weekly basis only.B. only when originally sold.C. on TRACE.D. by the SEC.E. only on government issues.

Q: Assume a semi-annual coupon bond matures in 3 years, has a face value of $1,000, a current market price of $989, and a 5 percent coupon. Which one of the following statements is correct concerning this bond?A. The current coupon rate is greater than 5 percent.B. The bond is a money market instrument.C. The bond will pay less annual interest now than when it was originally issued.D. The current yield exceeds the coupon rate.E. The bond will pay semi-annual payments of $50 each.

Q: Which one of the following sentences is correct concerning fixed-income securities? A. The coupon rate on a fixed-income security is equal to the current yield. B. The price of a fixed-income security is inversely related to the current yield. C. Fixed-income securities are default free. D. Fixed-income securities tend to be more liquid than money market securities. E. Fixed-income securities include all debt instruments issued by the U.S. government.

Q: Which one of the following is classified as a fixed-income security? A. U.S. Treasury bill B. 6-month municipal bond C. common stock that pays regular quarterly dividends D. 2-year U.S. Treasury security E. 9-month bank certificate of deposit

Q: Money market instruments issued by a corporation: A. are default-free. B. are less liquid than those issued by the government. C. must be held by the original purchaser until maturity. D. can only be resold to the original issuer. E. are risk-free.

Q: Money market instruments: A. tend to be illiquid. B. are generally sold in small denominations. C. cannot be resold. D. may be sold on a discount basis. E. are quoted in terms of a spread.

Q: Riverside Metals recently issued some debt that had an original maturity of nine months. This debt is best classified as a(n): A. option contract. B. money market instrument. C. fixed-income security. D. derivative security. E. futures contract.

Q: The amount of money per share that will be received when a put option on stock is exercised is called the _____ price. A. market B. stock C. strike D. future E. obligated

Q: The price paid to purchase an option contract is called the: A. strike price. B. option premium. C. exercise price. D. future premium. E. current yield.

Q: A contract that grants its buyer the right, but not the obligation, to sell an asset at a specified price is called a: A. futures contract. B. call option. C. preset contract. D. put option. E. primary contract.

Q: A call option is an agreement that: A. obligates both the buyer and seller to a future transaction. B. grants the seller the right to buy a security at a predetermined price. C. gives the buyer the right to purchase an asset at some point in the future. D. grants the seller the right, but not the obligation, to sell an asset. E. presets a price but not a time period.

Q: An agreement that grants the owner the right, but not the obligation, to buy or sell a specific asset at a specified price during a specified time period is called a(n) _____ contract. A. futures B. obligatory C. quoted D. fixed E. option

Q: A futures contract is an agreement:A. that obligates a corporation to issue additional securities at a specified date in the future.B. to exchange financial assets on a specified date in the future with the price determined on that date.C. to deliver goods today in exchange for an agreed upon payment to be paid on a specified date in the future.D. to exchange a specified quantity of goods on a specified date in the future at the current market price.E. to exchange goods on a specified date in the future at a price that is agreed upon today.

Q: A financial asset that represents a claim on another financial asset is classified as a _____ asset. A. secondary B. optioned C. contracted D. derivative E. primary

Q: A security originally sold by a business or government to raise money is called a(n): A. derivative. B. primary asset. C. primary debt. D. futures contract. E. option contract.

Q: The annual interest payment divided by the current price of a bond is called the: A. coupon rate. B. current yield. C. yield-to-maturity. D. yield-to-market. E. market yield.

Q: A fixed-income security is defined as: A. a debt obligation that pays a fixed rate of return for a one-year period of time. B. common or preferred stock that pays a fixed annual dividend. C. a long-term debt obligation that pays scheduled fixed payments. D. long-term debt issued solely by a federal or state government. E. any security originally issued as either debt or equity that pays a fixed, pre-set payment.

Q: Which one of the following is the best definition of a money market instrument? A. corporate debt that matures in 90 days or less B. bank savings account C. investment issued by a financial institution that matures in 30 days or less D. investment issued by a financial institution that matures in one year or less E. debt issued by the government or a corporation that matures in one year or less

Q: Briefly compare and contrast options and futures.

Q: Why would you purchase a call option? What is your maximum profit or loss on such a position?

Q: Explain what a put option is and describe the circumstances under which you would be willing to sell a put.

Q: Farmer Mac raises wheat. He expects his yield this summer to be 320,000 bushels but he decides to sell futures contracts on only 230,000 bushels. What is his logic for selling futures and why didn't he sell futures on his entire crop?

Q: Preferred stock is sometimes considered to be a cross between debt and equity. Describe the characteristics of preferred stock that make it similar to debt as well as the characteristics that make it similar to equity.

Q: What are the basic differences between a T-Bill and a T-Bond? Which security(ies) are considered risk-free?

Q: Alicia owns 500 shares of Danube stock. She thinks the market price will continue to rise but would like to ensure that she can get at least $47.50 a share should she decide to sell her shares.The 47.50 call option is quoted at $1.05 bid, $1.15 ask. The 47.50 put is quoted at $0.80 bid, $0.85 ask. How much will it cost her to ensure that she can sell all of her shares for at least $47.50 each?A. $805B. $740C. $670D. $530E. $425

Q: You own 300 shares of stock which you would like to have the right to sell at $40 a share. The 40 call option is quoted at $0.35 bid, $0.40 ask. The 40 put is quoted at $0.45 bid, $0.50 ask. How much will it cost you to obtain the right to sell all of your shares at $40 a share? A. $135 B. $50 C. $150 D. $105 E. $75

Q: You purchased 600 shares of SLG, Inc. stock at a price of $41.20 a share. You then purchased put options on your shares with a strike price of $45.00 and an option premium of $1.10. At expiration, the stock was selling for $48.30 a share. You sold your shares on the option expiration date. What is your net profit or loss your transactions related to SLG, Inc. stock? A. $2,650 B. $3,250 C. $3,600 D. $4,150 E. $4,300

Q: You bought a put option contract with a strike price of $37.50 and a premium of $1.80. At expiration, the stock was selling for $35 a share. What is the net total amount you received for your shares assuming that you disposed of your shares on the expiration date? A. $3,680 B. $3,930 C. $3,570 D. $3,330 E. $3,320

Q: You purchased six put option contracts with a strike price of $30 and a premium of $0.90. At expiration, the stock was selling for $26.80 a share. What is the total net amount you received for your shares, assuming that you disposed of your shares on the expiration date? A. $17,955 B. $17,460 C. $17,045 D. $17,815 E. $17,160

Q: You purchased six put option contracts with a strike price of $45 and a premium of $1.10. What is the total net amount you will receive for your shares if you exercise this contract when the underlying stock is selling for $42.90 a share? A. $23,660 B. $24,700 C. $25,740 D. $26,340 E. $26,400

Q: You purchased four call option contracts with a strike price of $25.00 and a premium of $1.25. At expiration, the stock was selling for $26.80 a share. What is the total amount it cost you to acquire your shares? A. $8,620 B. $9,060 C. $10,500 D. $11,860 E. $12,400

Q: You bought five call option contracts with a strike price of $47.50 and an option premium of $1.20. At expiration, the stock was selling for $51.30 a share and you exercised your option. What is your total cost basis in the acquired shares? A. $23,150 B. $25,050 C. $23,750 D. $24,350 E. $26,250

Q: You bought eight call option contracts with a strike price of $27.50 and a premium of $0.66. At expiration, the stock was selling for $26.90 a share. What is the total profit or loss on your option position if you did not exercise it prior to the expiration date? A. -$9.24 B. -$10.20 C. $0 D. -$528 E. -$920

Q: You purchased three call option contracts with a strike price of $22.50 and an option premium of $0.45. You held the option until the expiration date. On the expiration date, the stock was selling for $21.70 a share. What is the total profit or loss on your option position? A. -$45 B. $0 C. -$240 D. -$120 E. -$135

Q: You purchased four call option contracts with a strike price of $40 and an option premium of $1.25. You closed your contract on the expiration date when the stock was selling for $42.50 a share. What is your total profit or loss on your option position? A. -$50 B. -$10 C. $135 D. $385 E. $500

Q: Use these option quotes to answer this question:You want the right, but not the obligation, to sell 600 shares of ZZ Industries stock at a price of $35 a share. How much will it cost you to establish this option position?A. $422B. $408C. $360D. $378E. $382

Q: Use these option quotes to answer this question:You want to sell four call option contracts on ZZ Industries stock at a strike price of $32.50 a share. How much will you receive in option premiums if you place this order today?A. $300B. $1,290C. $1,320D. $728E. $546

Q: The 47.50 put on a stock is trading at 1.32 bid and 1.37 ask. To buy one option contract, you must pay _____ at the time the contract is purchased.A. $1.32B. $132.00C. $137.00D. $4,613.00E. $4,882.00

Q: Use these option quotes to answer this question:You own 700 shares of ZZ Industries stock which you purchased for $36.60 a share. You would like to have the right to sell your shares for $32.50 a share. What will be the cost to obtain this right?A. $0.40B. $0.90C. $7.00D. $396.00E. $900.00

Q: Use these option quotes to answer this question:You would like to have the right to purchase 200 shares of ZZ Industries stock at a price of $32.50 a share. How much will it cost you to buy options to meet this objective?A. $103.11B. $12.90C. $374.00D. $430.00E. $561.00

Q: You would like to lock in the selling price on 60,000 bushels of wheat, which you plan to harvest and deliver to the market in September. The September futures price quote is currently 902΄6. If you write September futures contracts on your wheat, you will be guaranteed a total price of _____ for your crop. Each contract is quoted in cents and 1/8 ths of a cent per bushel with a contract size of 5,000 bushels.A. $45,637.50B. $541,650.00C. $11,908.75D. $297,700.50E. $2,977,000.25

Q: You own one futures contract on gold that you purchased at a quoted price of 948.4. The current price quote is 1008.8. The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce. What is your current profit or loss on this investment? A. $30.40 B. $912.00 C. $3,040.00 D. $6,040.00 E. $9,120.00

Q: You purchased five August 13 futures contracts on soybeans at a price quote of 1056"²6. Each contract is for 5,000 bushels with the price quoted in cents and 1/8 ths of a cent per bushel. Assume the contract price is 1061"²4 when you close out your contract six weeks from now. What will be your total profit or loss on this investment? A. $950.25 B. $1,187.50 C. $6,480.75 D. $16,200.50 E. $24,000.00

Q: Use the following soybean futures quotes:You purchased four November 08 futures contracts on soybeans when they first became available this morning. Your investment has been worth as little as _____ and as much as _____.A. $255,350; $265,500B. $255,350; $265,020C. $257,440; $265,500D. $257,440; $265,020E. $257,440; $265,520

Q: Use the following soybean futures quotes to answer this question:What was the total price fluctuation on one November 08 soybeans contract today?A. $1,537.50B. $1,540.00C. $1,612.50D. $1,660.00E. $1,682.50

Q: Use the following soybean futures quotes to answer this question:Julie was lucky enough to purchase two September 08 futures contracts on soybeans when the contracts were at the lowest price of the day. What is Julie's total profit or loss as of the end of the day?A. $25.00B. $50.00C. $60.00D. $250.00E. $260.00

Q: Use the following soybean futures quotes to answer this question:Last week, you purchased four November 08 soybean futures contracts when the price quote was 1300΄6. What is your current profit or loss on this investment?A. -$3,100.00B. -$2,625.00C. -$31.00D. $987.50E. $3,350.00

Q: Use the following stock quotes to answer this question:A pension fund purchased 25 round lots of Baker Company stock at the closing price of the day yesterday. What was the cost of that purchase?A. $7,810B. $8,040C. $201,000D. $241,200E. $256,800

Q: Use the following stock quotes to answer this question:What is the latest earnings per share for Baker Co. stock if the PE is 22?A. $1.06B. $1.10C. $2.19D. $3.55E. $4.10

Q: Use the following stock quotes to answer this question:Vivian purchased 700 shares of Aldridge, Inc. stock at what turns out to be the lowest price during the past year. How much has the value of her shares changed since she made this investment?A. -$4,970B. $60C. $1,950D. $420E. $5,390

Q: Use the following stock quotes to answer this question:What was the previous day's closing price for Chelsea Ind. stock?A. $34.70B. $44.10C. $48.20D. $58.10E. $60.40

Q: Use the following stock quotes to answer this question:Baker Company has 136,000 shares of stock outstanding and a PE ratio of 18. What was the net income for the most recent four quarters?A. $590,089B. $678,003C. $727,972D. $1,306,900E. $1,405,800

Q: Use the following stock quotes to answer this question:Aldridge, Inc. pays an annual dividend of $1.18. What is the dividend yield on this stock?A. 2.09 percentB. 3.42 percentC. 4.60 percentD. 7.20 percentE. 8.04 percent

Q: Use the following stock quotes to answer this question:Josh owns 200 shares of Chelsea stock. What is the current value of his shares?A. $6,605B. $8,820C. $9,640D. $9,850E. $10,920

Q: Use the following stock quotes to answer this question: What is the current yield on Buy Rite stock?A. 1.38 percentB. 2.60 percentC. 3.55 percentD. 4.25 percentE. 5.20 percent

Q: Use the following bond quotes to answer this question:If you purchase five Zeus bonds, the cost will be _____ and the annual interest income will be _____.A. $5,000.00; $388.75B. $5,000.00; $412.50C. $5,000.00; $460.00D. $5,101.50; $412.50E. $5,101.50; $460.00

Q: Use the following bond quotes to answer this question:The Talliru Company bond pays interest semi-annually. You own eight of these bonds. What is the amount you will receive as your next interest payment?A. $76.00B. $228.00C. $190.00D. $254.00E. $304.00

Q: Briefly describe the NYSE up-tick rule, the rationale for it and the current status of the rule.

Q: Briefly discuss the difference between strategic and tactical asset allocation.

Q: This morning, you shorted 100 shares of Better Foods stock at a price per share of $46. What is the maximum potential profit and maximum potential loss on this position?

Q: You are having a discussion with Kate when she mentions that she just initiated a short position on ABC stock. Given that statement, what do you know about Kate's future outlook for ABC stock?

Q: Briefly discuss any three (3) constraints that an investor might face in designing his investment strategy and how they affect that strategy.

Q: Briefly describe the basic elements of an Investment Policy Statement and its importance.

Q: Last week, you sold short 300 shares of stock for $35 a share. The initial margin requirement is 65 percent and the maintenance margin is 30 percent. Today, that stock is selling for $38 a share. Construct a balance sheet for this short sale reflecting today's values.

Q: You just sold short 700 shares of Highway Construction stock for $31 a share. The initial margin requirement is 70 percent and the maintenance margin is 35 percent. Construct a balance sheet depicting this transaction.

Q: Recently, you sold 500 shares of stock for $16.60 a share. The sale was a short sale with an initial margin requirement of 70 percent. The maintenance margin is 35 percent. The stock is currently trading at $17.80 a share. What is your current short position in this stock?A. $4,916B. $6,830C. $8,900D. $10,362E. $11,976

Q: Recently, you sold 1,000 shares of stock for $21,400. The sale was a short sale with an initial margin requirement of 60 percent. The maintenance margin is 30 percent. The stock is currently trading at $27.50 a share. What is your current margin position in this stock? A. 24.51 percent B. 28.11 percent C. 32.09 percent D. 43.98 percent E. 46.69 percent

Q: Last week, you sold 400 shares of Hi-Lo stock for $12,400. The sale was a short sale with an initial margin requirement of 70 percent. The maintenance margin is 40 percent. Some positive news concerning the company was released last night and the stock price jumped this morning to $38 a share. What is your current margin position in this stock? A. 61.33 percent B. 56.67 percent C. 48.33 percent D. 38.68 percent E. 25.83 percent

Q: You just sold 1,200 shares of stock short at a price per share of $13.50. The initial margin requirement is 60 percent and the maintenance margin is 30 percent. What is your initial equity position? A. $6,480 B. $7,520 C. $9,720 D. $10,520 E. $16,200

Q: The short interest on Blue Water Cruisers stock was 351,900 when the market opened this morning. During the day, 288,500 shares were covered and 151,600 shares were sold short. What was the short interest on this stock at the end of the trading day? A. 203,100 shares B. 215,000 shares C. 233,100 shares D. 308,100 shares E. 447,900 shares

Q: Matt short sold 500 shares of Tall Pines stock at $19 a share at an initial margin of 65 percent. The maintenance margin is 35 percent. What is the highest the stock price can go before he receives a margin call? A. $20.12 B. $21.48 C. $23.22 D. $24.07 E. $25.16

Q: 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? A. $38.97 B. $40.15 C. $41.85 D. $43.75 E. $45.77

Q: 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? A. $46.86 B. $47.08 C. $55.50 D. $56.90 E. $57.40

Q: Matt short sold 600 shares of stock at $10.50 a share. The initial margin is 80 percent and the maintenance margin is 50 percent. The stock is currently selling for $6.80 a share. What is Matt's account equity at this time? Ignore margin interest. A. $3,070 B. $5,590 C. $7,260 D. $9,950 E. $11,510

Q: Today, you short sold 1,100 shares of Jasper Industrial stock at $48 a share. The initial margin is 60 percent and the maintenance margin is 30 percent. Which one of the following is correct concerning your account balance sheet for this transaction? A. You have an asset of $31,680 from the sale proceeds. B. You have a liability from the short position of $21,120. C. Your account equity is $21,120. D. Your initial margin deposit is $15,840. E. Your total assets are $84,480.