12. Suppose you short-sell 100 shares of IBM, now selling at $200 per share. (LO 3-4)
a. What is your maximum possible loss?
b. What happens to the maximum loss if you simultaneously place a stop-buy order at $210?
14. DRK, Inc., has just sold 100,000 shares in an initial public offering. The underwriter’s
explicit fees were $60,000. The offering price for the shares was $40, but immediately
upon issue, the share price jumped to $44.
a. What is your best guess as to the total cost to DRK of the equity issue?
b. Is the entire cost of the underwriting a source of profit to the underwriters?
15. Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at
$40 per share. She borrows $4,000 from her broker to help pay for the purchase. The
interest rate on the loan is 8%. (LO 3-4)
a. What is the margin in Dée’s account when she first purchases the stock?
b. If the share price falls to $30 per share by the end of the year, what is the remaining
margin in her account? If the maintenance margin requirement is 30%, will she
receive a margin call?
16. Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams
from the previous question. The initial margin requirement was 50%. (The margin
a. What is the remaining margin in the account?
b. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?
c. What is the rate of return on the investment?
17. Consider the following limit order book for a share of stock. The last trade in the stock
occurred at a price of $50. (LO 3-3)
Limit Buy Orders Limit Sell Orders
Price Shares Price Shares
$49.75 500 $50.25 100
49.50 800 51.50 100
49.25 500 54.75 300
49.00 200 58.25 100
a. If a market buy order for 100 shares comes in, at what price will it be filled?
b. At what price would the next market buy order be filled?
c. If you were a security,would you want to increase or decrease your inventory of
11. An open-end fund has a net asset value of $10.70 per share. It is sold with a front-end
load of 6%. What is the offering price?
13. The composition of the Fingroup Fund portfolio is as follows:
Stock Shares Price
A 200,000 $35
B 300,000 40
C 400,000 20
D 600,000 25
The fund has not borrowed any funds, but its accrued management fee with the portfolio
manager currently totals $30,000. There are 4 million shares outstanding. What is
the net asset value of the fund?
15. The Closed Fund is a closed-end investment company with a portfolio currently worth
$200 million. It has liabilities of $3 million and 5 million shares outstanding. (LO 4-3)
a. What is the NAV of the fund?
b. If the fund sells for $36 per share, what is its premium or discount as a percent of NAV?
16. Corporate Fund started the year with a net asset value of $12.50. By year-end, its NAV
equaled $12.10. The fund paid year-end distributions of income and capital gains of
$1.50. What was the rate of return to an investor in the fund?
22. The New Fund had average daily assets of $2.2 billion in the past year. The fund sold
$400 million and purchased $500 million worth of stock during the year. What was its
24. You purchased 1,000 shares of the New Fund at a price of $20 per share at the beginning
of the year. You paid a front-end load of 4%. The securities in which the fund
invests increase in value by 12% during the year. The fund’s expense ratio is 1.2%. What
is your rate of return on the fund if you sell your shares at the end of the year?
27. Suppose that every time a fund manager trades stock, transaction costs such as commissions
and bid–ask spreads amount to .4% of the value of the trade. If the portfolio turnover
rate is 50%, by how much is the total return of the portfolio reduced by trading
28. You expect a tax-free municipal bond portfolio to provide a rate of return of 4%. Management
fees of the fund are .6%. What fraction of portfolio income is given up to fees?
If the management fees for an equity fund also are .6%, but you expect a portfolio return
of 12%, what fraction of portfolio income is given up to fees? Why might management
fees be a bigger factor in your investment decision for bond funds than for stock funds?
Can your conclusion help explain why unmanaged unit investment trusts tend to focus
on the fixed-income market?
Why Work with Us
Top Quality and Well-Researched Papers
We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.
Professional and Experienced Academic Writers
We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.
Free Unlimited Revisions
If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.
Prompt Delivery and 100% Money-Back-Guarantee
All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.
Original & Confidential
We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.
24/7 Customer Support
Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.
No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.
Admission Essays & Business Writing Help
An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.
Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.
If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.