Question: An investor is in the 28% tax

> Charlotte Smidt bought 2,000 shares of the balanced no-load LaJolla Fund exactly one year and two days ago for an NAV of $8.60 per share. During the year, the fund distributed investment income dividends of $0.32 per share and capital gains dividends of

> Using the data in the following table, assume you are using a variable-ratio plan. You have decided that when the speculative portfolio reaches 60% of the total, you will reduce its proportion to 45%. What action, if any, should you take in time period t

> Identify the four main types of online investment tools. How can they help you become a better investor?

> Portfolio A and Portfolio B had the same holding period return last year. Most of the returns from Portfolio A came from dividends, while most of the returns from Portfolio B came from capital gains. Which portfolio was likely owned by a single working p

> Describe three ways in which investors can use stock options.

> Using the data in the following table, assume you are using a constant-dollar plan with a rebalancing trigger of $1,500. The stock price represents your speculative portfolio, and the MM mutual fund represents your conservative portfolio. What action, if

> Over the past two years, Jonas Cone has used a dollar-cost averaging formula to purchase $300 worth of FCI common stock each month. The price per share paid each month over the two years is given in the following table. Assume that Jonas paid no brokerag

> What are market anomalies and how do they come about? Do they support or refute the EMH? Briefly describe each of the following: a. The January effect b. The size effect c. The value effect

> The risk-free rate is currently 8.1%. Use the data in the accompanying table for the Fio family’s portfolio and the market portfolio during the year just ended to answer the questions that follow. a. Calculate Sharpeâ€&#153

> Chee Chew’s portfolio has a beta of 1.3 and earned a return of 12.9% during the year just ended. The risk-free rate is currently 4.2%. The return on the market portfolio during the year just ended was 11.0%. a. Calculate Jensen’s measure ( Jensen’s alph

> Niki Malone’s portfolio earned a return of 11.8% during the year just ended. The portfolio’s standard deviation of return was 14.1%. The risk-free rate is currently 6.2%. During the year, the return on the market portfolio was 9.0% and its standard devia

> One year ago, Super Star Closed-End Fund had an NAV of $10.40 and was selling at an 18% discount. Today, its NAV is $11.69 and it is priced at a 4% premium. During the year, Super Star paid dividends of $0.40 and had a capital gains distribution of $0.95

> Using the resources at your campus or public library (or on the Internet), select five mutual funds—a growth fund, an equity-income fund, an international (stock) fund, an index fund, and a high-yield corporate bond fund—that you think would make good in

> Listed below is the 10-year, per-share performance record of Larry, Moe, & Curley’s Growth Fund, as obtained from the fund’s May 30, 2016, prospectus. Use this information to find LM&C’s hol

> You’ve uncovered the following per-share information about a certain mutual fund: On the basis of this information, find the fund’s holding period return for 2014, 2015, and 2016. (In all three cases, assume you buy

> Sara Thomas is a child psychologist who has built a thriving practice in her hometown of Boise, Idaho. Over the past several years she has been able to accumulate a substantial sum of money. She has worked long and hard to be successful, but she never im

> What protection does the Securities Investor Protection Corporation (SIPC) provide for securities investors? How are mediation and arbitration procedures used to settle disputes between investors and their brokers?

> The All-State Mutual Fund has the following five-year record of performance: Find this no-load fund’s five-year (2012–2016) average annual compound rate of return. Also find its three-year (2014–201

> A year ago, the Really Big Growth Fund was being quoted at an NAV of $21.50 and an offer price of $23.35. Today, it’s being quoted at $23.04 (NAV) and $25.04 (offer). What is the holding period return on this load fund, given that it was purchased a year

> Explain why it is difficult, if not impossible, to consistently outperform an efficient market. a. Does this mean that high rates of return are not available in the stock market? b. How can an investor earn a high rate of return in an efficient market?

> A year ago, an investor bought 200 shares of a mutual fund at $8.50 per share. Over the past year, the fund has paid dividends of $0.90 per share and had a capital gains distribution of $0.75 per share. a. Find the investor’s holding period return, given

> A $1,000 par value bond has a current price of $800 and a maturity value of $1,000 and matures in five years. If interest is paid semiannually and the bond is priced to yield 8%, what is the bond’s annual coupon rate?

> Using semiannual compounding, find the prices of the following bonds. a. A 10.5%, 15-year bond priced to yield 8% b. A 7%, 10-year bond priced to yield 8% c. A 12%, 20-year bond priced at 10% Repeat the problem using annual compounding. Then comment on t

> Elliot Karlin is a 35-year-old bank executive who has just inherited a large sum of money. Having spent several years in the bank’s investments department, he’s well aware of the concept of duration and decides to apply it to his bond portfolio. In parti

> Stacy Picone is an aggressive bond trader who likes to speculate on interest rate swings. Market interest rates are currently at 9%, but she expects them to fall to 7% within a year. As a result, Stacy is thinking about buying either a 25-year, zero-coup

> Which one of the following bonds would you select if you thought market interest rates were going to fall by 50 basis points over the next six months? a. A bond with a Macaulay duration of 8.46 years that’s currently being priced to yield 7.5% b. A bond

> Describe call and put options. Are they issued like other corporate securities?

> Find the Macaulay duration and the modified duration of a 20-year, 10% corporate bond priced to yield 8%. According to the modified duration of this bond, how much of a price change would this bond incur if market yields rose to 9%? Using annual compound

> A bond has a Macaulay duration of 8.62 and is priced to yield 8%. If interest rates go up so that the yield goes to 8.5%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7.5%, what will be the bond

> In what two ways, based on the number of shares transacted, do brokers typically charge for executing transactions? How are online transaction fees structured relative to the degree of broker involvement?

> Using annual compounding, find the yield to maturity for each of the following bonds. a. A 9.5%, 20-year bond priced at $957.43 b. A 16%, 15-year bond priced at $1,684.76 c. A 5.5%, 18-year bond priced at $510.65 Now assume that each of the above bonds i

> What is a stock chart? What kind of information can be put on charts, and what is the purpose of charting?

> What are two or three of the major investment attributes of common stocks?

> A 25-year, zero-coupon bond was recently being quoted at 11.625% of par. Find the current yield and the promised yield of this issue, given that the bond has a par value of $1,000. Using semiannual compounding, determine how much an investor would have t

> Two bonds have par values of $1,000. One is a 5%, 15-year bond priced to yield 8%. The other is a 7.5%, 20-year bond priced to yield 6%. Which of these has the lower price? (Assume annual compounding in both cases.)

> Assume that an investor is looking at two bonds: Bond A is a 20-year, 9% (semiannual pay) bond that is priced to yield 10.5%. Bond B is a 20-year, 8% (annual pay) bond that is priced to yield 7.5%. Both bonds carry 5-year call deferments and call prices

> A 10%, 25-year bond has a par value of $1,000 and a call price of $1,075. (The bond’s first call date is in five years.) Coupon payments are made semiannually (so use semiannual compounding where appropriate). a. Find the current yield, YTM, and YTC on t

> What are indicators of bond market behavior, and how are they different from stock market indicators? Name three sources of bond yield data.

> Compute the current yield of a 10%, 25-year bond that is currently priced in the market at $1,200. Use annual compounding to find the promised yield on this bond. Repeat the promised yield calculation, but this time use semiannual compounding to find yie

> An investor is considering the purchase of an 8%, 18-year corporate bond that’s being priced to yield 10%. She thinks that in a year, this bond will be priced in the market to yield 9%. Using annual compounding, find the price of the bond today and in on

> What is the current yield for a $1,000 par value bond that pays interest semiannually, has nine years to maturity, and is currently selling for $937 with a bond equivalent yield of 12%?

> Assume that you pay $850 for a long-term bond that carries a 7½% coupon. Over the course of the next 12 months, interest rates drop sharply. As a result, you sell the bond at a price of $962.50. a. Find the current yield that existed on this bond at the

> Which of the following bonds offers the highest current yield? a. A 9½%, 20-year bond quoted at 97¾ b. A 16%, 15-year bond quoted at 164⅝ c. A 5¼%, 18-year bond quoted at 54

> What is day trading, and why is it risky? How can you avoid problems as an online trader?

> Briefly describe each of the following and note how it is computed and how it is used by technicians: a. Advance-decline lines b. Arms index c. On-balance volume d. Relative strength index e. Moving averages

> Sara Nixon is looking for a fixed-income investment. She is considering two bond issues: a. A Treasury with a yield of 5% b. An in-state municipal bond with a yield of 4% Sara is in the 33% federal tax bracket and the 8% state tax bracket. Which bond wou

> Maria Lopez is a wealthy investor who’s looking for a tax shelter. Maria is in the maximum (35%) federal tax bracket and lives in a state with a very high state income tax. (She pays the maximum of 11½% in state income tax.) Maria is currently looking at

> An investor lives in a state with a 3% income tax rate. Her federal income tax bracket is 35%. She wants to invest in one of two bonds that are similar in terms of risk (and both bonds currently sell at par value). The first bond is fully taxable and off

> Which indexes can you use to compare your investment performance to general market returns? Briefly explain each of these indexes.

> Find the conversion value of a convertible preferred stock that carries a conversion ratio of 1.8, given that the market price of the underlying common stock is $40 a share. Would there be any conversion premium if the convertible preferred were selling

> Assume you just paid $1,200 for a convertible bond that carries a 7½% coupon and has 15 years to maturity. The bond can be converted into 24 shares of stock, which are now trading at $50 a share. Find the bond investment value of this issue, given that c

> An 8% convertible bond carries a par value of $1,000 and a conversion ratio of 20. Assume that an investor has $5,000 to invest and that the convertible sells at a price of $1,000 (which includes a 25% conversion premium). How much total income (coupon p

> A certain 6% annual coupon rate convertible bond (maturing in 20 years) is convertible at the holder’s option into 20 shares of common stock. The bond is currently trading at $800. The stock (which pays 75¢ a share in annual dividends) is currently price

> You are considering investing $800 in Higgs B. Technology Inc. You can buy common stock at $25 per share; this stock pays no dividends. You can also buy a convertible bond ($1,000 par value) that is currently trading at $790 and has a conversion ratio of

> A certain convertible bond has a conversion ratio of 21 and a conversion premium of 20%. The current market price of the underlying common stock is $40. What is the bond’s conversion equivalent?

> What is the random walk hypothesis, and how does it apply to stocks? What is an efficient market? How can a market be efficient if its prices behave in a random fashion?

> Differentiate between the services and costs associated with full-service, premium discount, and basic discount brokers. Be sure to discuss online transactions.

> Red Electrica España SA (E.REE) is refinancing its bank loans by issuing Eurobonds to investors. You are considering buying $10,000 of these bonds, which will yield 6%. You are also looking at a U.S. bond with similar risk that will yield 5%. You expect

> What role does current market information play in analyzing investment returns? How do changes in economic and market activity affect investment returns? Explain.

> Letticia Garcia, an aggressive bond investor, is currently thinking about investing in a foreign (non-dollar-denominated) government bond. In particular, she’s looking at a Swiss government bond that matures in 15 years and carries a 9½% coupon. The bond

> In early January 2010, you purchased $30,000 worth of some high-grade corporate bonds. The bonds carried a coupon of 8â…›% and mature in 2024. You paid a price of 94.125 when you bought the bonds. Over the five years from 2010 through 201

> You are presented with the following data: Calculate the MFCR for each week. Based on the result, are you bullish or bearish? Mutual Fund Cash Mutual Fund Total Week Position Assets Most recent $281,478,000 $2,345,650,000 2 $258,500,000 $2,350,000,

> You are given the following information for the number of stocks making new highs and new lows for each day: a. Calculate the 10-day moving-average NH-NL indicator. b. If there are 120 new highs and 20 new lows today, what is the new 10-day moving aver

> Below are figures representing the number of stocks making new highs and new lows for each month over a six-month period: Would a technical analyst consider the trend to be bullish or bearish over this period? Explain. Month New Highs New Lows July

> Compute the level of on-balance volume (OBV) for the following three-day period for a stock, if the beginning level of OBV is 50,000 and the stock closed yesterday at $25. Does the movement in OBV appear to confirm the rising trend in prices? Explain.

> Listed below are data that pertain to the corporate bond market. (Note: Each “period” below covers a span of six months.) a. Compute the confidence index for each of the four periods listed above. b. Assume that the

> Data on a stock’s closing price and its price change for the last 14 trading days appears below. a. Over this 14-day period what is the average gain on up days? (Note: to calculate the average, divide the sum of all gains by 14, not b

> Briefly describe the P/E approach to stock valuation and note how this approach differs from the variable-growth DVM. Describe the P/CF approach and note how it is used in the stock valuation process. Compare the P/CF approach to the P/E approach, noting

> You find the closing prices for a stock you own. You want to use a 10-day moving average to monitor the stock. Calculate the 10-day moving average for days 11 through 20. Based on the data in the table below, are there any signals you should act on? Expl

> Why is it important to continuously manage and control your portfolio?

> If growth, income, and capital preservation are the primary objectives of mutual funds, why do we bother to categorize funds by type? Do you think such classifications are helpful in the fund selection process? Explain.

> Differentiate among market orders, limit orders, and stop-loss orders. What is the rationale for using a stop-loss order rather than a limit order?

> Compute the Arms index for the S&P 500 over the following three days: Which of the three days would be considered the most bullish? Explain why. Number of Number of Stocks Rising in Price Stocks Falling Volume for Stocks Volume for Stocks Day i

> Melissa Popp is thinking about buying some shares of R. H. Lawncare Equipment, at $48 per share. She expects the price of the stock to rise to $60 over the next three years. During that time she also expects to receive annual dividends of $4 per share. a

> Last year, InDebt Company paid $75 million of interest expense, and its average rate of interest for the year was 10%. The company’s ROE is 15%, and it pays no dividends. Estimate next year’s interest expense assuming that interest rates will fall by 25%

> World Wide Web Wares (4W, for short) is an online retailer of small kitchen appliances and utensils. The firm has been around for a few years and has created a nice market niche for itself. In fact, it actually turned a profit last year, albeit a fairly

> Newco is a young company that has yet to make a profit. You are trying to place a value on the stock, but it pays no dividends and you obviously cannot calculate a P/E ratio. As a result, you decide to look at other stocks in the same industry as Newco t

> Assume you obtain the following information about a certain company: Total assets ……………………………………………………………………. $50,000,000 Total equity ……………………………………………………………………. $25,000,000 Net income ……………………………………………………………………… $3,750,000 EPS ………………………………………………………………

> Assume a major investment service has just given Oasis Electronics its highest investment rating, along with a strong buy recommendation. As a result, you decide to take a look for yourself and to place a value on the company’s stock. Here’s what you fin

> A particular company currently has sales of $250 million; sales are expected to grow by 20% next year (year 1). For the year after next (year 2), the growth rate in sales is expected to equal 10%. Over each of the next two years, the company is expected

> How would you go about finding the expected return on a stock? Note how such information would be used in the stock selection process.

> Dave and Marlene Carter live in the Boston area, where Dave has a successful orthodontics practice. Dave and Marlene have built up a sizable investment portfolio and have always had a major portion of their investments in fixed-income securities. They ad

> New Millennium Company earned $2.5 million in net income last year. It took depreciation deductions of $300,000 and made new investments in working capital and fixed assets of $100,000 and $350,000, respectively. a. What was New Millennium’s free cash fl

> Assume there are three companies that in the past year paid exactly the same annual dividend of $2.25 a share. In addition, the future annual rate of growth in dividends for each of the three companies has been estimated as follows: Assume also that as

> Briefly differentiate among the following types of brokerage accounts: a. Single or joint b. Custodial c. Cash d. Margin e. Wrap

> This year, Shoreline Light and Gas (SL&G) paid its stockholders an annual dividend of $3 a share. A major brokerage firm recently put out a report on SL&G predicting that the company’s annual dividends would grow at the rate of 10% per year for each of t

> The price of Myrtle’s Plumbing Supply Co. is now $80. The company pays no dividends. Ms. Bossard expects the price three years from now to be $110 per share. Should she buy Myrtle’s Plumbing stock if she desires a 10% rate of return? Explain.

> Let’s assume that you’re thinking about buying stock in West Coast Electronics. So far in your analysis, you’ve uncovered the following information: The stock pays annual dividends of $5.00 a share indefinitely. It trades at a P/E of 10 times earnings an

> Assume you’ve generated the following information about the stock of Bufford’s Burger Barns: The company’s latest dividends of $4 a share are expected to grow to $4.32 next year, to $4.67 the year after that, and to $5.04 in three years. After that, you

> An investor estimates that next year’s sales for Dursley’s Hotels, Inc., should amount to about $100 million. The company has five million shares outstanding, generates a net profit margin of about 10%, and has a payout ratio of 50%. All figures are expe

> Financial Learning Systems has 2.5 million shares of common stock outstanding and 100,000 shares of preferred stock. (The preferred pays annual cash dividends of $5 a share, and the common pays annual cash dividends of 25 cents a share.) Last year, the c

> Highgate Computer Company produces $1.8 million in profits from $27 million in sales. It has total assets of $15 million. a. Calculate Highgate’s total asset turnover and its net profit margin. b. Find the company’s ROA, ROE, and book value per share, gi

> What role could an asset allocation fund play? What makes an asset allocation scheme effective?

> Jack Arnold is a resident of Lubbock, Texas, where he is a prosperous rancher and businessman. He has also built up a sizable portfolio of common stock, which, he believes, is due to the fact that he thoroughly evaluates each stock he invests in. As Jack

> PEGCOR has a P/E ratio of 15. Earnings per share are $2.00, and the expected EPS five years from today is $3.22. Calculate the PEG ratio.

> The Amherst Company has net profits of $10 million, sales of $150 million, and 2.5 million shares of common stock outstanding. The company has total assets of $75 million and total stockholders’ equity of $45 million. It pays $1 per share in common divid

> The following summary financial statistics were obtained from the 2015 Otago Bay Marine Motors (OBMM) annual report. 2015 ($ in millions) Sales revenue ………………………………………………………………………………… $179.3 Total assets …………………………………………………………………………………… $136.3 Net earni

> Describe the types of services offered by brokerage firms, and discuss the criteria for selecting a suitable stockbroker.

> The following table lists the 2015 and 2016 financial statements for Otago Bay Marine Motors, a major manufacturer of top-of-the-line outboard motors. a. On the basis of the information provided, calculate the following financial ratios for 2015 and

> Listed below are six pairs of stocks. Pick one of these pairs and then, using the resources available at your campus or public library (or on the Internet), comparatively analyze the two stocks. Which is fundamentally stronger and holds more promise for