Question: What is the price of a zero-

> Referring to Problem 13.18, assume you are using a constant-ratio plan with a rebalance trigger of speculative-to-conservative of 1.25. What action, if any, should you take in time period 2? Be specific. Data from Problem 13.18: Using the data in the fo

> 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

> 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 Sharpe’s

> 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 alpha)

> Your portfolio returned 13% last year, with a beta equal to 1.5. The market return was 10%, and the risk-free rate was 4%. Did you earn more or less than the required rate of return on your portfolio?

> On April 13, 2017, Yext Inc. completed its IPO on the NYSE. Yext sold 10,500,000 shares of stock at an offer price of $11 per share. Yext’s closing stock price on the first day of trading on the secondary market was $13.41. a. Calculate the gross proceed

> During the year just ended, Anna Schultz’s portfolio, which has a beta of 0.90, earned a return of 8.6%. The risk-free rate is currently 3.3%, and the return on the market portfolio during the year just ended was 9.2%. a. Calculate Treynor’s measure for

> Your portfolio has a beta equal to 1.3. It returned 12% last year. The market returned 10%; the risk-free rate is 2%. Calculate Treynor’s measure for your portfolio and the market. Did you earn a better return than the market given the risk you took?

> 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

> Congratulations! Your portfolio returned 11% last year, 2% better than the market return of 9%. Your portfolio’s return had a standard deviation equal to 18%, and the risk-free rate is 3%. Calculate Sharpe’s measure for your portfolio. If the market’s Sh

> Refer to the following table: Between Investor A and Investor B, which is more likely to represent a retired couple? Why?

> Five years ago, you invested in the Future Investco Mutual Fund by purchasing 1,500 shares of the fund at a net asset value of $18.75 per share. Because you did not need the income, you elected to reinvest all dividends and capital gains distributions. T

> The Good Pick Closed-End Fund turned in the following performance for the year 2019. a. Based on this information, what was the NAV-based HPR for the GPCEF in 2019? b. Find the percentage (%) premium or discount at which the fund was trading at the begin

> One year ago, Big Deal Closed-End Fund had a NAV of $10.20 and was selling at an 16% discount. Today, its NAV is $11.59, and it is priced at a 3% premium. During the year, Big Deal paid dividends of $0.35 and had a capital gains distribution of $0.90. On

> 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 the Blue Chip Growth Fund as obtained from the fund’s May 30, 2019, prospectus. Use this information to find the holding period return in 2019 and 2016. Also find the fund&aci

> On April 27, 2018, DocuSign, a California company that provides technology to enable digital signatures on important documents, conducted its initial public offering (IPO) of common stock. In the primary market the company’s shares were priced at $29 per

> You’ve uncovered the following per-share information about a certain mutual fund: Find the fund’s holding period return for 2017, 2018, and 2019. (In all three cases, assume you buy the fund at the beginning of the yea

> The All-State Mutual Fund has the following five-year record of performance: Find this no-load fund’s five-year (2015–2019) average annual compound rate of return. Also find its three-year (2017–2019)

> A year ago, the Very Large Growth Fund was quoted at a NAV of $21.25 and an offer price of $23.25. Today, it’s being quoted at $22.94 (NAV) and $24.94 (offer). What is the holding period return on this load fund, given that it was purchased a year ago an

> Create a spreadsheet model similar to the spreadsheet for Table 12.2, which you can view at www.pearson.com/mylab/finance, to analyze the following three years of data relating to the MoMoney Mutual Fund. It should report the amount of dividend income an

> On January 1, 2018, you purchased 1,000 shares of a fund for $20.00 per share. During the year, you received $2.00 in dividends, half of which was from dividends on stock the fund held and half of which was from interest earned on bonds in the fund portf

> You are considering the purchase of shares in a closed-end mutual fund. The NAV is equal to $23.75, and the latest close is $25.50. Is this fund trading at a premium or a discount? How big is the premium or discount?

> Refer to Problem 12.11. If Best was a load fund with a 2.5% front-end load, what would be the HPR? Data from Problem 12.11: You invested in the no-load Best Mutual Fund one year ago by purchasing 1,000 shares of the fund at the net asset value of $20.00

> You invested in the no-load Best Mutual Fund one year ago by purchasing 1,000 shares of the fund at the net asset value of $20.00 per share. The fund distributed dividends of $1.00 and capital gains of $1.50. Today, the NAV is $21.00. What was your holdi

> Refer to Problem 12.9. If there were a 2.5% load on this fund, assuming you purchased the same number of shares, what would you rate of return be? Data from Problem 12.9: Five years ago, you invested in the Future Investco Mutual Fund by purchasing 1,50

> A year ago, an investor bought 100 shares of a mutual fund at $7.50 per share. This year, the fund paid dividends of $0.75 per share capital gains of $0.50 per share. a. Find the investor’s holding period return, given that this no-load fund now has a ne

> You have decided to open a margin account with your broker and to secure a margin loan. The initial margin requirement is 70%, and the maintenance margin is 30%. You have been following the price movements of a stock over the past year and believe that i

> Calculate the value of each of the bonds shown in the following table, all of which pay interest semiannually.

> Calculate the value of each of the bonds shown in the following table, all of which pay interest annually.

> A 15-year bond has a coupon of 8% and is priced to yield 6%. Calculate the price per $1,000 par value using semiannual compounding. If an investor purchases this bond two months before a scheduled coupon payment, how much accrued interest must be paid to

> 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?

> You have the opportunity to purchase a 25-year, $1,000 par value bond that has an annual coupon rate of 9%. If you require a YTM of 7.6%, how much is the bond worth to you?

> Using semiannual compounding, find the prices of the following bonds. a. A 10%, 15-year bond priced to yield 7% b. A 6%, 10-year bond priced to yield 10% c. An 11%, 20-year bond priced at 9% Repeat the problem using annual compounding. Then comment on th

> A bond issued by H&W Corporation has an annual-pay coupon of 5.625% plus a par value of $1,000 at maturity. This bond has a remaining maturity of 23 years. The required rate of return on securities of similar-risk grade is 6.76%. a. What is the value of

> 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 part

> 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 8.36 years that’s currently being priced to yield 7.25% b. A bond

> Sharnel Bitker expected the price of PharmaScripts shares to drop in the near future in response to the expected failure of its new drug to pass FDA tests. As a result, she sold short 1,000 shares of PharmaScripts at $9.75 per share. How much would Sharn

> Find the Macaulay duration and the modified duration of a 15-year, 9% corporate bond priced to yield 7%. According to the modified duration of this bond, how much of a price change would this bond incur if market yields rose to 8%? Using annual compoundi

> An investor wants to find the duration of a 25-year, 6% semiannual-pay, noncallable bond that’s currently priced in the market at $882.72 to yield 7%. Using a 50 basis point change in yield, find the effective duration of this bond.

> A bond has a Macaulay duration of 8.24 and is priced to yield 7%. If interest rates go up so that the yield goes to 7.5%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 6.5%, what will be the bond

> Two bonds have par values of $1,000. One is a 6%, 20-year bond priced to yield 7%. The other is an 8%, 25-year bond priced to yield 5%. Which of these has the lower price? (Assume annual compounding in both cases.)

> A bond has a Macaulay duration equal to 9.8 and a yield to maturity of 8%. What is the modified duration of this bond?

> Using annual compounding, find the yield to maturity for each of the following bonds. a. A 9.75%, 18-year bond priced at $962.41 b. A 14%, 20-year bond priced at $1,612.98 c. A 6.25%, 15-year bond priced at $592.45 Now assume that each of the previous bo

> Assume that an investor pays $850 for a long-term bond that carries a 10% coupon. In three years, he hopes to sell the issue for $975. If his expectations come true, what yield will this investor realize? (Use annual compounding.) What would the holding

> Each of the bonds shown in the following table pays interest annually. a. Calculate the yield to maturity (YTM) for each bond. b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond

> A 20-year, zero-coupon bond was recently being quoted at 10.625% 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

> Calculate the profit or loss per share realized on each of the following short-sale Transactions.

> A zero-coupon bond that matures in 20 years is currently selling for $156 per $1,000 par value. What is the promised yield on this bond?

> Assume that an investor is looking at two bonds: Bond A is a 25-year, 9.5% (semiannual pay) bond that is priced to yield 10%. Bond B is a 25-year, 9% (annual pay) bond that is priced to yield 8%. Both bonds carry five-year call deferments and call prices

> An 8.5%, 20-year bond has a par value of $1,000 and a call price of $1,050. (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

> You are evaluating an outstanding issue of $1,000 par value bonds with an 8.75% coupon rate that mature in 25 years and make quarterly interest payments. If the current market price for the bonds is $865, what is the quoted annual yield to maturity for t

> You are considering the purchase of a $1,000 par value bond with a 6.5% coupon rate (with interest paid semiannually) that matures in 12 years. If the bond is priced to provide a required return of 8%, what is the bond’s current price?

> Compute the current yield of an 8%, 20-year bond that is currently priced in the market at $1,150. 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

> CSM Corporation has a bond issue outstanding that has 15 years remaining to maturity and carries a coupon interest rate of 6%. Interest on the bond is paid on a semiannual basis. The par value of the CSM bond is $1,000, and it is currently selling for $

> A bond is currently selling in the market for $1,085.96. It has a coupon of 8% and a 15-year maturity. Using annual compounding, calculate the yield to maturity on this bond.

> Lynn Parsons is considering investing in either of two outstanding bonds. The bonds both have $1,000 par values and 11% coupon interest rates and pay annual interest. Bond A has exactly 5 years to maturity, and bond B has 15 years to maturity. a. Calcula

> You notice in the WSJ a bond that is currently selling in the market for $1,070 with a coupon of 11% and a 20-year maturity. Using annual compounding, calculate the promised yield on this bond.

> An investor short sells 75 shares of a stock for $69 per share. The initial margin is 60%, and the maintenance margin is 40%. The price of the stock rises to $82 per share. What is the margin, and will there be a margin call?

> An investor is considering the purchase of an 6%, 15-year corporate bond that’s being priced to yield 8%. She thinks that in a year, this bond will be priced in the market to yield 7%. Using annual compounding, find the price of the bond today and in one

> 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%?

> A $1,000 par value bond with a 7.25% coupon rate (semiannual interest) matures in seven years and currently sells for $987. What is the bond’s yield to maturity and bond equivalent yield?

> A bond is priced in the market at $1,185 and has a coupon of 7%. Calculate the bond’s current yield.

> Three years ago you purchased a 10% coupon bond that pays semiannual coupon payments for $975. What would be your bond equivalent yield if you sold the bond for its current market price of $1,050?

> A firm wishing to evaluate interest rate behavior has gathered yield data on five U.S. Treasury securities, each having a different maturity and all measured at the same point in time. The summarized data follow. a. Draw the yield curve associated with t

> Assume that you pay $825 for a long-term bond that carries a 8% coupon. Over the course of the next 12 months, interest rates drop sharply. As a result, you sell the bond at a price of $952.25. a. Find the current yield that existed on this bond at the b

> Which of the following bonds offers the highest current yield? a. A 12%, 19-year bond quoted at 135 b. A 5.6%, 28-year bond quoted at 63 c. An 8%, 23-year bond quoted at 90

> Jake Baldwin is looking for a fixed-income investment. He is considering two bond issues: a. A Treasury with a yield of 5.5% b. An in-state municipal bond with a yield of 3.8% Jake is in the 32% federal tax bracket and the 6% state tax bracket. Which bon

> Janice Wilcox is a wealthy investor who’s looking for a tax shelter. Janice is in the maximum (37%) federal tax bracket and lives in a state with a very high state income tax. (She pays the maximum of 12.3% in state income tax.) Janice is currently looki

> An investor short sells 75 shares of a stock for $69 per share. The initial margin is 60%, and the maintenance margin is 40%. The price of the stock falls to $57 per share. What is the margin, and will there be a margin call?

> 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

> An investor is in the 24% tax bracket and lives in a state with no income tax. He is trying to decide which of two bonds to purchase. One is a 7% corporate bond that is selling at par. The other is a municipal bond with a 5% coupon that is also selling a

> Buck buys a 7.5% corporate bond with a current yield of 4.8%. How much did he pay for the bond?

> Find the conversion value of a convertible preferred stock that carries a conversion ratio of 1.6, given that the market price of the underlying common stock is $35 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 7% coupon and has 20 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 co

> A certain bond has a current yield of 6.5% and a market price of $846.15. What is the bond’s coupon rate?

> 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 ($1,000 par value, 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)

> 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 19 and a conversion premium of 15%. The current market price of the underlying common stock is $30. What is the bond’s conversion equivalent?

> An investor short sells 250 shares of a stock for $43 per share. The initial margin is 60%. Ignoring transaction costs, how much will be in the investor’s account after this transaction if this is the only transaction the investor has undertaken and the

> Kim and Kanye have been dating for years and are now thinking about getting married. As a financially sophisticated couple, they want to think through the tax implications of their potential union. a. Suppose Kim and Kanye both earn $70,000 (so their com

> Red Eléctrica de España SA is refinancing its bank loans by issuing 6.5% euro denominated bonds to investors. You are considering buying €15,000 of these bonds at par value. You could also invest $15,000 in a 5.5% U.S. bond (also at par value) with simil

> 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 9.5% coupon. The bon

> Burt purchased an interest-bearing security last year, planning to hold it until maturity. He received interest payments and, to his surprise, a sizable amount of the principal was paid back in the first year. This happened again in year two. What type o

> Rhonda purchased a 12%, zero-coupon bond with a 20-year maturity and a $15,000 par value 20 years ago. The bond matures tomorrow. How much will Rhonda receive in total from this investment, assuming all payments were made on these bonds as expected?

> In early January 2014, you purchased $100,000 worth of some high-grade corporate bonds. The bonds carried a coupon of 6% and mature in 2027. You paid a price of 102.625 when you bought the bonds. Over the five years from 2014 through 2018, the bonds were

> Caleb buys an 8.75% corporate bond with a current yield of 5.6%. When he sells the bond one year later, the current yield on the bond is 6.6%. How much did Caleb make on this investment?

> A 9%, 20-year bond is callable in 12 years at a call price of $1,090. The bond is currently priced in the market at $923.68. What is the issue’s current yield?

> 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-avera

> At the end of a trading day you find that on the NYSE 1,200 stocks advanced and 2,000 stocks declined. What is the value of the advance-decline line for that day?

> You hear a market analyst on television say that the advance/decline ratio for the session was 2.2. What does that mean?

> An investor short sells 500 shares of a stock for $35 per share. The initial margin is 45%. How much equity will be required in the account to complete this transaction?

> Following 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.

> 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 $42. Does the movement in OBV appear to confirm the rising trend in prices? Explain.

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

> 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.

> Which of the following facts, if true, would violate the weak form of the efficient markets hypothesis? a. Stocks earn higher returns than bonds over time. b. You can earn better-than-average returns by purchasing a stock any time it reaches a 52-week hi