Exam 1
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You purchased 1,000 shares of PINS common stock on margin at $19 per share. Assume the initial margin
is 50%, and the maintenance margin is 30%. Below what stock price level would you get a margin call?
Assume the stock pays no
dividend; ignore interest on margin.
$12.86
You Answered
$15.75
$19.67
Correct Answer
$13.57
1.000 shares $19 x 0.5 = $19,000 0.5 = $9,500 (loan amount); 0.30 = (1,000P - $9,500)/1,000P: 300P =
1,000P - $9.500; -700P = -$9.500; P = $13.57.
Question 2
Which of the following orders is most useful to short sellers who want to limit their potential losses?
Limit order
Discretionary order
Limit-loss order
Stop-buy order
By issuing a stop-buy order, the short seller can limit potential losses by assuring that the stock will be
purchased (and the short position closed) if the price increases to a certain level.
Question 3
0 / 1 pts
Which of the following orders instructs the broker to sell at or above a specified price?
You Answered
Limit-buy order
Discretionary orden
Correct Answer
Limit-sell order
Stop-buy onder
Market onder
Limit-sell orders are to be executed the market price increases to the specified limit price.
1/1 pts
Question 4
You sell short 100 shares of Loser Co. at a market price of $45 per share. Your maximum possible loss is
$4.500.
-Correct!
unlimited
59.000
Cannot be determined from the information given
A short seller loses money when the stock price rises. Since there is no upper limit on the stock price, the
maximum theoretical loss is unlimited
Question 6
0 / 1 pts
You sold short 100 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 35%?
Correct Answer
$50
$65
You Answered
$35
540
Equity = 100($45) * 1.5 = $6,750; 0135 = ($6,750 - 100P)/100P; 35P = $6,750 - 100P; 135P = $6,750; P =
$50.00
Question 7
1 / 1 pts
Multiple Mutual Funds had year-end assets of $457,000,000 and liabilities of $17,000,000. There were
24,300,000.
shares in the fund at year end. What was Multiple Mutual's net asset value?
Correct!
$18.11
$18.81
$69.96
$7.00
($457.000.000 - 17.000.000)/24,300,000 = $18.11.
Question 8
1/1 pts
Pinnacle Fund had year-end assets of $825.000.000 and liabilities of $25,000,000. If Pinnacle's NAV was
$32.1, how many shares must have been held in the fund?
21.619.346.92
22.930,546.28
Correct!
24,860,161.59
25.693,645.2
($825,000,000 - 25,000,000)/$32.18 = 24.860,161.59.
Question 9
1/1 pts
Which of the following statements about real estate investment trusts is true?
REITs may be equity trusts or mortgage trusts
REITs are usually highly leveraged
REITs are similar to closed-end funds
REITs may be equity trusts or mortgage trusts and are usually leveraged
Correct!
All of the options are true.
Real estate investment trusts invest in real estate or real-estate-secured loans. They may raise capital
from
banks and by issuing mortgages. They are similar to closed-end funds and shares are typically exchange
traded
Question 10
1/1 pts
Compared to mutual funds, hedge funds may use the following strategy.
Growth
O Value
Sector specialization
Correct!
Significant leverage
Because hedge funds are only lightly regulated, their managers can pursue investment strategies
involving, for example, heavy use of derivatives, short sales, and leverage; such strategies typically are
not open to mutual fund managers.
Question 11
1/1 pts
are real assets
Land
Machines
Stocks and bonds
wledge
Land, machines, and knowledge
Land, machines and knowledge are real assets stocks and bonds are financial assets,
Question 12
1/1 pts
The value of a derivative security
Correct!
depends on the value of the related security.
is unable to be calculated.
is unrelated to the value of the related security.
has been enhanced due to the recent misuse and negative publicity regarding these instruments.
is worthless today.
Of the factors cited above, only the value of the related security affects the value of the derivative
and/or is a true statement.
Question 13
Which of the following portfolio construction methods starts with asset allocation?
Correct Answer
O Top-down
Bottom-up
Middle-out
Buy and hold
You Answered
Asset allocation
Bottom-up refers to using security analysis to find securities that are attractively priced.
Question 14
0 / 1 pts
Financial intermediaries exist because small investors cannot efficiently
diversify their portfolios.
assess credit risk of borrowers.
advertise for needed investments.
You Answered
diversify their portfolios and
ess credit risk of borrowers.
Correct Answer
All of the options.
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NAME
Herbalife Nutrition
Herc Holdings
Heritage Insurance Holdings HRTG
Hersha Hospitality Trust CIA
HT
Hershey
HSY
HTZ
SYMBOL CLOSE NET CHG
57.94 -1.39
26.86 -0.71
14.57
-0.38
Hertz Global Holdings
Hess Corp.
Hess Midstream Partners
HLF
HRI
HES
HESM
Hewlett Packard Enterprise HPE
16.59 -0.16
106.24
0.80
-0.77
13.27
42.39 0.15
17.87 0.25
13.18 -0.28
VOLUME
DIV YIELD P/E
1,149,773 60.41
389,826 72.99
81,929 19.15
732,879 24.16
1,145,889 114.63
52 WK 52 WK
HIGH LOW
34.16 1.20 2.07 47.75 -1.71
24.16
3.10 3.35
12.85 0.24 1.65 22.01 -1.02
2,965,201 25.14
16.50 1.12 6.75 ...dd -5.42
89.10 2.89 2.72 22.00 -0.88
13.01
2.24 -2.78
35.59 1.00 2.36
...dd
47,899 24.51 16.17 1.43 8.00 14.60
12.09 0.45 3.41 11.46
5,969,511 74.81
11,756,695 19.48
****
****
YTD
%CHG
Figure 2.8 Listing of stocks traded on the New York Stock Exchange
Source: WSJ Online, January 4, 2019.
4.67
5.24
-0.23
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