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Homework 1 Solution

# Homework 1 Solution - for margin Liabilities are 100P...

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FINA 469 -- Solution to Homework 1 Section I: Multiple Choices 1-5 DADBB 6-10 CDBBD 11-15 CCCBC 16-20 BCBBC 21-25 ADBAB 26-30 DCDDA Section II: Numerical Solutions Chapter 2: 14. The after-tax yield on the corporate bonds is: [0.09 x (1 – 0.30)] = 0.0630 = 6.30%. Therefore, the municipals must offer at least 6.30% yields. 22. Price= \$10,000 * [1-3.4% * (87/360)] = \$9,917.83 Bond Equivalent Yield (10,000 / 9,917.83-1)* 365/87 = 3.476% Chapter 3: 17. a. Initial margin is 50% of \$5,000 or \$2,500. b. Total assets are \$7,500 (\$5,000 from the sale of the stock and \$2,500 put up

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Unformatted text preview: for margin). Liabilities are 100P. Therefore, net worth is (\$7,500 – 100P). A margin call will be issued when: = 0.30 when P = \$57.69 or higher 19. a. 55.50 b. 55.25 c. The trade will not be executed because the bid price is lower than the price specified in the limit sell order. d. The trade will not be executed because the asked price is greater than the price specified in the limit buy order. Chapter 4: 13. Stock Value held by fund A \$ 7,000,000 B 12,000,000 C 8,000,000 D 15,000,000 Total \$42,000,000 Net asset value = = \$10.49...
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