Practice solutions

# Practice solutions - Names _KEY_ _ _ Homework 1 FIN 4504...

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A. Gubin Homework 1, FIN 4504 1 Names _________KEY____________ _________________________ _________________________ Homework 1 FIN 4504 Equity and Capital Markets A. Gubin Fall 2009 Instructions. Answer all questions. I will check to make sure that you make an honest attempt to answer all of the questions, and then I will formally grade five of the multiple choice questions and a few of the remaining problems. You may work in groups of up to three people and you only need to turn in one copy of the assignment per group. Multiple Choice. Circle the best/most correct answer. 1. What’s the maximum amount of money you can lose if you go long 100 shares of stock XYZ at \$20 per share (assume the firm has a total of \$1 million shares outstanding)? a. \$20 b. \$200 c. \$2,000 d. \$0 e. unlimited 2. Shares for short sales are borrowed from _______________ ? a. the Federal Reserve b. the specialist for that stock c. commercial banks d. the short seller’s broker e. none of the above 3. Which of the following type of fund has the lowest expense ratio? a. index b. growth c. specialty d. income e growth and income

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A. Gubin Homework 1, FIN 4504 2 4. To estimate the market cap of all stocks in the U.S., take the value of the ______________ and multiply it by 1 billion dollars. a. S&P 500 b. Dow Jones Industrial Average c. Wilshire 5000 d. FTSE 100 e. NYSE Composite 5. Assume you purchased 200 shares of MSFT common stock at \$30 per share from your broker. If the initial margin is 55%, the amount you borrowed from your broker is _____________. a. \$1,200 b. \$2,700 c. \$3,300 d. \$4,200 e. \$6,000 6. _______________ is the rate at which an investor is willing to trade risk for return. a. The indifference curve b. The utility function c. Risk aversion d. The insurance premium e. The concavity of the utility function 7. The holding period return on a stock was 35%. Its ending price was \$25 and its beginning price was \$20. Its cash dividend must have been _____________. a. \$3.00 b. \$2.00 c. \$1.00 d. \$5.00 e. \$2.20
A. Gubin Homework 1, FIN 4504 3 8. Which of the following statements regarding American Depository Receipts (ADRs) is false? a. ADRs are domestically traded securities that represent claims to shares of foreign stocks. b. ADRs allow US investors to trade foreign securities without exchange rate risk. c. Each ADR can represent 1 share, a fraction of a share, or multiple shares in a foreign

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## This note was uploaded on 12/03/2009 for the course FIN 4504 taught by Professor Banko during the Fall '08 term at University of Florida.

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Practice solutions - Names _KEY_ _ _ Homework 1 FIN 4504...

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