Chapter01
1。A municipal bond carries a coupon of 63⁄4％ and is trading at par； to a taxpayer in a 34% tax bracket， this bond would provide a taxable equivalent yield of:
a. 4。5%  b。 10。2％ c。 13。4% d。 19.9％
2. Consider the three stocks in the following table. Pt represents price at time t， and Qt represents shares outstanding at time t。 Stock C splits two for one in the last period.
calculate the return rate of market—value—weighted index of the three stocks at T =1.
Chapter 02—03
1。 Suppose that you sell short 100 shares of IBX, now selling at $70 per share.
a。 What is your maximum possible loss?
b. What happens to the maximum loss if you simultaneously place a stop—buy order
  at $78 ?
2。 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%.
a。 What is the margin in Dée’s account when she first purchases the stock?
b. If the 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?
c。 What is the rate of return on her investment？
3. Old Economy Traders opened an account to short sell 1，000 shares of Internet Drea
ms from the previous problem。 The initial margin requirement was 50%。 （The margin account pays no interest.) A year later， the price of Internet Dreams has risen from ＄40 to $50， and the stock has paid a dividend of $2 per share。
a。 What is the remaining margin in the account?
b。 If the maintenance margin requirement is 30％, will they receive a margin call?
c。 What is the rate of return on the investment?
4。 Consider the following limit-order book of a specialist. The last trade in the stock took place at a price of ＄50.
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 the specialist, would you desire to increase or decrease your inventory of this stock？
5。 Here is some price information on Fincorp stock。 Suppose first that Fincorp trades in a dealer market。
a.Suppose you have submitted an order to your broker to buy at market。 At what price will your trade be executed?
b。 Suppose you have submitted an order to sell at  market. At  what price will your trade be executed?
c。 Suppose an investor has submitted a limit order to sell at ＄55.38。 What will happen?
d. Suppose another investor has submitted a limit  order to buy at $55。38. What will happen？
6. You’ve borrowed $20，000 on margin to buy shares in Disney, which is now selling at ＄40 per share。 Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%。 Two days later， the stock price falls to $35 per share。
a。 Will you receive a margin call?
b. How low can the price of Disney shares fall before you receive a margin call？
7。You are bearish on Telecom stock and decide to sell short 100 shares at the current market price of $25 per share。
a。 How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position?
b。 How high can the price of the stock go before you get a margin call if the maintenance margin is 30％ of the value of the short position？
8. If you place a stop—loss order to sell 100 shares of stock at $55 when the current price is ＄62， how much will you receive for each share if the price drops below ＄55?
a。 $50.  b. ＄55。  margin ratec. $54。90.  d. Cannot tell from the information given.
9。You wish to sell short 100 shares of XYZ Corporation stock. If the last two transactions were at $34。10 followed by $34。15， you only can sell short on the next transaction at a price of
a。 ＄34。10 or higher. b. $34.15 or higher. c. ＄34。15 or lower。 d. ＄34.10 or lower.
10. Specialists on the New York Stock Exchange do all of the following except
a. Act as dealers for their own accounts. b. Execute limit orders。
c。 Help provide liquidity to the marketplace. d。 Act as odd—lot dealers.
11。On January 1, you sold short one round lot (i.e。, 100 shares） of Zenith stock at ＄14 per share. On March 1， a dividend of ＄2 per share was paid。 On April 1， you c
overed the short sale by buying the stock at a price of $9 per share。 You paid 50 cents per share in commissions for each transaction。 What is the value of your account on April 1？
Chapter 05
1.You are considering the choice between investing ＄50,000 in a conventional 1-year bank CD offering an interest rate of 7％ and a 1—year “Inflation—Plus” CD offering 3。5％ per year plus the rate of inflation。

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