Econ+132A+practice+mt

Econ+132A+practice+mt - Econ 132A Midterm Exam I...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Econ 132A Midterm Exam I A.Sohrabian Winter 2010 Answer All Questions. Numerical Problems (74 points) 1. You sold short 300 shares of common stock at $45 per share. The initial margin is 50%. At What stock price would you receive a margin call if the maintenance margin is 30%. 2. Assume you purchased 200 shares of XYZ common stock on margin at $50 per share from you broker. If the initial margin is 60%, how much did you borrow from the broker? ' 3. You purchased 150 shares of ABC common stock on margin at $60 per share. Assume the initial margin is 56% and the maintenance margin is 25%. Below what stock price level wouid you get a margin call? 4. 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 wouid your rate of return be if you sell the stock at $45 per share? 5. Consider the following three stocks. Price Number of shares outstanding Stock A $60 100 Stock B $70 500 Stock C $20 600 a. What is the priceuweighted index constructed with the three stocks? b. What is the value—weighted index constructed with the three stocks using a divisor of 100? c. What would the value-weighted index be if sock B is split 2 for 1 and stock C 4 £04 1? 6. A portfolio has an expected rate of return of 0.18 and a standard deviation of 0.20. The risk-free rate (is 4 percent. An investor has the following utility function: U=E(r) — (A/2)z7' . Which value of A makes the investor indifferent between the risky portfolio and the risk-free asset? 7. You are considering investing $1000 in a T—bill that pays 0.05 and a risky portfoiio, P, constructed with 2 risky securities, X and Y. The weights of X and Y in P are 0.60 and 0.40, respectively. X has and expected rate of return 0f0.14 and a variance of 0.01, and Y has an expected rate of return of 0.10 and a variance of 0.0081. 3. If you desire to form a portfolio with an expected rate of return of 0.1 1, what percentage of your money must you invest in the T-bill and P, respectively? b. What would be the dollar value of your position in X, Y, and the T-bills, respectively, if you decide to hold a portfolio that has an expected outcome of $1080? True/False Questions (2 points each) 00 10. 11. 12. 13. . The real rate of interest is determined by the expected rate of inflation. Initial margin requirements are determined by the Federal Reserve System. You sold ABC stock short at $80 per share. Your losses could be minimized by placing a limitusell order. Certificate of deposit offers a guaranteed real rate of interest. If stock ABC is selling at $50, a limit-buy order may instruct the broker to buy the stock if and when the share price falls below $45. In a “firm commitment” the investment banker agrees to help the firm sell the stock at a favorable price. A form of short-term borrowing by dealers in government securities is banker’s acceptance. A sale of IBM of new stock to the public would be an initial public offering. A call option allows the buyer to buy the underlying asset at the exercise price on or before the expiration date. If the nominal return is constant, the after-tax real rate of return increases as the inflation rate decreases. Financial assets permit consumption timing, allocation of risk, separation of ownership and control, and elimination of risk. The DJ IA is affected equally by changes in low and high priced stocks. You sell short 100 shares of Loser Co. at a market price of $45 per share. Your maximum possible 1083 is $4500. Econ 132A Winter 2010 A; W 0/? 45C}: Solution to Midterm l A.Sohrabian 5Z9“)? m 1,171+; ”” ,gtJ/ijn—Z/élb [4&7 sfimk O Wt/C‘ 2w {46}-+ «50(9601545)_3W/ Magi/9 ' 16w? 9%3: IMKO 1567" 1% fl __ ,44 Mia/n;ij b'—"—-'--——-—._..- ' (3&0 éojrf$1<U egg-7C? iflL/xg'+prxefl4 30a(’éa)(,40): 72097 10a” 3 i i I GMI ; f flffl ,. 5 (7- .. .. . i 7 1., _ 300(46)_7Z/m, ,3”- ' . Vgflvymg [Mn . J36“? r fi/o (1750 I : w4l‘g7/ W‘- W o a (50+7¢+9,0)/3 H56 10 WOW/7L (ma) + (20 mm (-5.530 _. _ ) Cm I/O’ZE" LIV-2W \W‘ALXM 64/? mcfll‘ 7 q//%CM Lo 5W 5mg: ! . 430 H c, :— no6CX) .+ ‘124{/,X) x: (in? 2 71,914! IWX : [#23-7/ ‘3 3 gm dew/m;— sIA/a)” 1;) ,0 .405 2am: $2»? m X A05 x./la:g;)£1, M 7” 123 fl.5/%TYA7.MNL owl All l{JuliljwlzllnllllélliI1.lliniiijpllll‘dlllll‘lillllllll:1l1lll1.l|.3]l|:|!1l§l|wl.l.iii‘ellJlui..i‘nliéIluljltllsiqsitiiiiililiiizmiaziiefittilt$241.2..1 [zaéiitxts)afis}7i.liluaii}¢lsfiizzillir|§3 ii|l 1:11:13;1}1!i1i:...ijtsirjljiliigiaaififzktiiééiixlaafiliiibiaiiléiaiilliifiialillaiaiiililiizai 34!!!!31:11.11!!!.,ia....+ll§§.,.:!ll.i..ill!l»l,..ilzi1l|ljl|al-li 1.51.155- i u ...
View Full Document

This note was uploaded on 11/27/2010 for the course ECON ECON132A taught by Professor Ahmadsohrabian during the Spring '10 term at UC Irvine.

Page1 / 7

Econ+132A+practice+mt - Econ 132A Midterm Exam I...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online