Notes and Quiz Solutions

Notes and Quiz Solutions - ECON 133 Summer 2009 Quiz 3 :...

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Unformatted text preview: ECON 133 Summer 2009 Quiz 3 : August 17 Name: & & & & & & & & & & & & & & & SID: & & & & & & & & & & & & & & & Score: & & & & & & & & & & & & & & & 1. (3 points) Stocks& Companies in the SP 500 index see a declining dividend payout ratio over time. Which of the following explanations is the LEAST plausible? (a) The payout ratio is declining because the companies are making more money over time, while smoothing out dividend payments. (b) Since dividends are taxed at a higher tax rate than the capital gain, repurchases of stocks are a better way to return investments to shareholders. (c) Because of the high population growth, America is becoming younger. Young generations do not depend on dividends as much as seniors. (d) Stock options issued to motivate executives tend to be more valuable when there are no dividends. ANS: (c) 2. (9 points) Margin Trading and Short Selling& Use the following IBM stock data to answer the questions. Date Price per share Event 7/31 100 8/31 40 2:1 stock split (price is after splitting) 9/30 45 (a) Mary purchases 100 shares of IBM stocks on margin on 7/31. If the monthly interest rate is 1%, what is the remaining margin in her account on 8/31? If the maintenance margin is 40%, has she already received a margin call?...
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This note was uploaded on 04/07/2010 for the course ECON 133 taught by Professor Chen during the Summer '09 term at UCSC.

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Notes and Quiz Solutions - ECON 133 Summer 2009 Quiz 3 :...

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