BUSI 420 Homework 2 Overview of Securities Types Assignment solutions complete answers

BUSI 420 Homework 2 Overview of Securities Types Assignment solutions complete answers

 

Question 1

 

You found the following stock quote for DRK Enterprises, Inc., at your favorite website. You also found that the stock paid an annual dividend of $.65, which resulted in a dividend yield of 1.20 percent.

 

a. What was the closing price for this stock yesterday? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

b. How many round lots of stock were traded? (Round your answer to the nearest whole round lot.)

 

Question 2

 

You found the following stock quote for DRK Enterprises, Inc., at your favorite website. You also found that the stock paid an annual dividend of $.69, which resulted in a dividend yield of 1.5 percent. Assume the company has 83 million shares of stock outstanding and a P/E ratio of 19.

 

What was net income for the most recent four quarters? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

 

Question 3

 

You find a stock selling for $85.36 that has a dividend yield of 1.35 percent. What was the last quarterly dividend paid? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

Question 4

 

You find a stock selling for $91.14 that has a dividend yield of 2.6 percent and a P/E ratio of 14.0. What is the earnings per share (EPS) for the company? (Round your answer to 2 decimal places.)

 

Question 5

 

You purchase 2,000 bonds with a par value of $1,000 for $986 each. The bonds have a coupon rate of 6.3 percent paid semiannually and mature in 10 years. How much will you receive on the next coupon date? How much will you receive when the bonds mature? (Do not round intermediate calculations. Round your answers to the nearest whole number.)

 

Question 6

 

The contract size for platinum futures is 50 troy ounces. Suppose you need 200 troy ounces of platinum and the current futures price is $1,130 per ounce. How many contracts do you need to purchase? How much will you pay for your platinum? What is your dollar profit if platinum sells for $1,170 a troy ounce when the futures contract expires? What if the price is $1,075 at expiration? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole number.)

 

Question 7

 

You purchase 9 call option contracts with a strike price of $65 and a premium of $1.85. Assume the stock price at expiration is $72.46.

 

a. What is your dollar profit? (Do not round intermediate calculations.)

 

b. What is your dollar profit if the stock price is $58.41? (A negative value should be indicated by a minus sign. Do not round intermediate calculations.)

 

If the stock price is $, the call is 

 

Question 8

 

Use the following corn futures quotes:

 

a. How many of the September contracts are currently open?

 

b. How many of these contracts should you sell if you wish to deliver 120,000 bushels of corn in September?

 

c. If you actually make delivery, how much will you receive? Assume you locked in the settle price. (Do not round intermediate calculations. Round your answer to the nearest whole number.)

 

Question 9

 

Use the following corn futures quotes:

 

Suppose you sell 19 of the May corn futures at the high price of the day. You close your position later when the price is 464.500. Ignoring commission, what is your dollar profit on this transaction? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

Question 10

 

Use the following corn futures quotes:  

 

Suppose you buy 27 of the September corn futures contracts at the last price of the day. One month from now, the futures price of this contract is 464.125, and you close out your position. Calculate your dollar profit on this investment. (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

Question 11

 

Suppose you have $36,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $80 per share. You notice that a put option with a $80 strike is available with a premium of $3.00. Calculate your percentage return on the put option for the six-month holding period if the stock price declines to $76 per share. (A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your 6-month return as a percent rounded to 2 decimal places.)   

 

Question 12

 

The World Income Appreciation Fund has current assets with a market value of $12.2 billion and has 290 million shares outstanding. What is the net asset value (NAV) for this mutual fund? (Round your answer to 2 decimal places.)

 

Question 13

 

The World Income Appreciation Fund has current assets with a market value of $12.3 billion, 620 million shares outstanding, and a current market price quotation of $21.74. Calculate the front-end load. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

 

Question 14

 

The Emerging Growth and Equity Fund is a “low-load” fund. The current offer price quotation for this mutual fund is $29.49, and the front-end load is 1.45 percent.

 

a. What is the NAV? (Round your answer to 2 decimal places.)

 

b. If there are 21.1 million shares outstanding, what is the current market value of assets owned by the fund? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

 

Question 15

 

The Aqua Liquid Assets Money Market Mutual Fund has a NAV of $1 per share. During the year, the assets held by this fund appreciated by 0.4 percent. If you had invested $30,000 in this fund at the start of the year, how many shares would you own at the end of the year? What will the NAV of this fund be at the end of the year?

 

Question 16

 

An open-end mutual fund has the following stocks:

 

If there are 62,000 shares of the mutual fund, what is the NAV? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

Question 17

 

An open-end mutual fund has the following stocks:

 

The fund has 53,000 shares and liabilities of $125,000. What is the NAV of the fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

Question 18

 

An open-end mutual fund has the following stocks:

 

The fund has 52,000 shares and liabilities of $132,000. Assume the fund is sold with a front-end load of 4.5 percent. What is the offering price of the fund? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

Question 19

 

A mutual fund sold $134 million of assets during the year and purchased $148 million in assets. If the average daily assets of the fund were $416 million, what was the fund turnover? (Enter your answer as a percent rounded to 2 decimal places.)

 

Question 20

 

A closed-end fund has total assets of $495 million and liabilities of $280,000. Currently, 28 million shares are outstanding. What is the NAV of the fund? If the shares currently sell for $18.45, what is the premium or discount on the fund? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the NAV answer to 2 decimal places. Enter the premium or discount as a percent rounded to 2 decimal places.)

 

Question 21

 

You invested $95,000 in a mutual fund at the beginning of the year when the NAV was $81.18. At the end of the year, the fund paid $0.41 in short-term distributions and $0.58 in long-term distributions. If the NAV of the fund at the end of the year was $83.15, what was your return for the year? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)   

 

Question 22

 

A sector fund specializing in commercial bank stocks had average daily assets of $4.7 billion during the year. Suppose the annual operating expense ratio for the mutual fund is 1.25 percent, and the management fee is 1.00 percent. How much money did the fund’s management earn during the year? If the fund doesn’t charge any 12b-1 fees, how much were miscellaneous and administrative expenses during the year? (Do not round intermediate calculations. Enter your answer in dollars not in millions, e.g., 1,234,567.)  

 

Question 23

 

You purchased 2,600 shares in the New Pacific Growth Fund on January 2, 2016, at an offering price of $41.60 per share. The front-end load for this fund is 5 percent, and the back-end load for redemptions within one year is 2 percent. The underlying assets in this mutual fund appreciate (including reinvested dividends) by 6 percent during 2016, and you sell back your shares at the end of the year. If the operating expense ratio for the New Pacific Growth Fund is 1.89 percent, what is your total return from this investment? (Assume that the operating expense is netted against the fund’s return.) (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

 

Question 24

 

Suppose you’re evaluating three alternative MMMF investments. The first fund buys a diversified portfolio of municipal securities from across the country and yields 3 percent. The second fund buys only taxable, short-term commercial paper and yields 5.2 percent. The third fund specializes in the municipal debt from the state of New Jersey and yields 2.7 percent. You are a New Jersey resident, your federal tax bracket is 35 percent, and your state tax bracket is 8 percent. (Assume your state taxes do not affect your federal taxable income.)

 

1. Calculate the after-tax yield for each of the alternatives. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

 

2. Which of these three MMMFs offers you the highest after-tax yield?

 

Question 25

 

The Argentina Fund has $440 million in assets and sells at a discount of 6.5 percent to NAV. If the quoted share price for this closed-end fund is $17.45, how many shares are outstanding? (Do not round intermediate calculations. Round your answer to the nearest whole number.)   

 

 

Problem 4-20 Closed-End Funds (LO2, CFA3)
The Argentina Fund has $550 million in assets and sells at a discount of 6.7 percent to NAV. If the quoted share price for this closed-end fund is $13.26, how many shares are outstanding?

Note: Do not round intermediate calculations. Round your answer to the nearest whole number.

 

Problem 4-18 Taxes and MMMFs (LO2, CFA1)
Suppose you’re evaluating three alternative MMMF investments. The first fund buys a diversified portfolio of municipal securities from across the country and yields 2.6 percent. The second fund buys only taxable, short-term commercial paper and yields 5 percent. The third fund specializes in the municipal debt from the state of New Jersey and yields 2.3 percent. You are a New Jersey resident, your federal tax bracket is 35 percent, and your state tax bracket is 8 percent. (Assume your state taxes do not affect your federal taxable income.)

a.      Calculate the aftertax yield for each of the alternatives.

Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.

b.        Which of these three MMMFs offers you the highest aftertax yield?

 

Problem 4-13 Calculating Fees (LO2, CFA1)
Suppose you purchased 2,600 shares in the New Pacific Growth Fund on January 2, 2022, at an offering price of $41.60 per share. The front-end load for this fund is 5 percent, and the back-end load for redemptions within one year is 2 percent. The underlying assets in this mutual fund appreciate (including reinvested dividends) by 6 percent during 2022, and you sell back your shares at the end of the year. If the operating expense ratio for the New Pacific Growth Fund is 1.89 percent, what is your total return from this investment? (Assume that the operating expense is netted against the fund’s return.)

Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

 

Problem 4-12 Calculating Fees (LO2, CFA1)
A sector fund specializing in commercial bank stocks had average daily assets of $5.4 billion during the year. Suppose the annual operating expense ratio for the mutual fund is 0.70 percent, and the management fee is 0.45 percent. How much money did the fund’s management earn during the year? If the fund doesn’t charge any 12b-1 fees, how much were miscellaneous and administrative expenses during the year?

Note: Do not round intermediate calculations. Enter your answers in dollars not in millions, e.g., 1,234,567.

 

Problem 4-10 Mutual Fund Returns (LO2, CFA1)
You invested $20,000 in a mutual fund at the beginning of the year when the NAV was $66.74. At the end of the year, the fund paid $0.26 in short-term distributions and $0.43 in long-term distributions. If the NAV of the fund at the end of the year was $56.12, what was your return for the year?

Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

 

Problem 4-9 Closed-End Funds (LO2, CFA3)
A closed-end fund has total assets of $450 million and liabilities of $250,000. Currently, 25 million shares are outstanding. What is the NAV of the fund? If the shares currently sell for $18.15, what is the premium or discount on the fund?

Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the NAV answer to 2 decimal places. Enter the premium or discount as a percent rounded to 2 decimal places.

 

Problem 4-8 Turnover (LO2, CFA4)
A mutual fund sold $129 million of assets during the year and purchased $127 million in assets. If the average daily assets of the fund were $396 million, what was the fund turnover?

Note: Enter your answer as a percent rounded to 2 decimal places.

 

Problem 4-7 Front-End Load (LO2)
An open-end mutual fund has the following stocks:

Stock
Shares
Stock Price
A
12,000
$ 86
B
32,000
15
C
3,500
69
D
75,000
10
The fund has 49,000 shares and liabilities of $124,000. Assume the fund is sold with a front-end load of 2.5 percent. What is the offering price of the fund?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

 

Problem 4-6 NAV (LO2, CFA3)
An open-end mutual fund has the following stocks:

Stock
Shares
Stock Price
A
13,000
$ 84
B
33,000
15
C
20,000
61
D
65,000
20
The fund has 64,000 shares and liabilities of $210,000. What is the NAV of the fund?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

 

Problem 4-5 NAV (LO2, CFA3)
An open-end mutual fund has the following stocks:

Stock
Shares
Stock Price
A
8,000
$ 94
B
33,000
8
C
4,600
81
D
57,000
10
If there are 54,000 shares of the mutual fund, what is the NAV?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

 

Problem 4-4 Money Market Funds (LO2, CFA1)
The Aqua Liquid Assets Money Market Mutual Fund has a NAV of $1 per share. During the year, the assets held by this fund appreciated by 0.6 percent. If you had invested $50,000 in this fund at the start of the year, how many shares would you own at the end of the year? What will the NAV of this fund be at the end of the year?

 

Problem 4-3 Calculating NAV (LO2, CFA3)
The Emerging Growth and Equity Fund is a “low-load” fund. The current offer price quotation for this mutual fund is $19.45, and the front-end load is 1.5 percent.

a.      What is the NAV?

Note: Round your answer to 2 decimal places.

b.        If there are 16.4 million shares outstanding, what is the current market value of assets owned by the fund?

Note: Do not round intermediate calculations. Round your answer to the nearest whole number.

 

Problem 4-2 Front-End Loads (LO2)
The World Income Appreciation Fund has current assets with a market value of $9 billion, 340 million shares outstanding, and a current market price quotation of $27.95. Calculate the front-end load.

Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.

 

Problem 4-1 Net Asset Value (LO2, CFA3)
The World Income Appreciation Fund has current assets with a market value of $11.2 billion and has 420 million shares outstanding. What is the net asset value (NAV) for this mutual fund?

Note: Round your answer to 2 decimal places.

 

Problem 3-20 Option Returns (LO4, CFA4)
Suppose you have $36,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $80 per share. You notice that a put option with a $80 strike is available with a premium of $3.00. Calculate your percentage return for the six-month holding period if the stock price declines to $76 per share.

Note: A negative value should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your 6-month return as a percent rounded to 2 decimal places.

 

Problem 3-13 Using Futures Quotations (LO3, CFA4)
Use the following corn futures quotes:

Corn 5,000 bushels
Contract Month
Open
High
Low
Settle
Change
Open Interest
March
455.125
457.000
451.750
452.000
−2.750
597,913
May
467.000
468.000
463.000
463.250
−2.750
137,547
July
477.000
477.500
472.500
473.000
−2.000
153,164
September
475.000
475.500
471.750
472.250
−2.000
29,258
Suppose you buy 18 of the September corn futures contracts at the last price of the day. One month from now, the futures price of this contract is 462.500, and you close out your position. Calculate your dollar profit on this investment.

Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.

 

Problem 3-12 Futures Quotations (LO3, CFA4)
Use the following corn futures quotes:

Corn 5,000 bushels
Contract Month
Open
High
Low
Settle
Change
Open Interest
March
455.125
457.000
451.750
452.000
−2.750
597,913
May
467.000
468.000
463.000
463.250
−2.750
137,547
July
477.000
477.500
472.500
473.000
−2.000
153,164
September
475.000
475.500
471.750
472.250
−2.000
29,258
Suppose you sell 25 of the May corn futures at the high price of the day. You close your position later when the price is 463.375. Ignoring commission, what is your dollar profit on this transaction?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

 

Problem 3-11 Futures Quotations (LO3, CFA4)

Use the following corn futures quotes:

Corn 5,000 bushels
Contract Month
Open
High
Low
Settle
Change
Open Interest
March
455.125
457.000
451.750
452.000
−2.750
597,913
May
467.000
468.000
463.000
463.250
−2.750
137,547
July
477.000
477.500
472.500
473.000
−2.000
153,164
September
475.000
475.500
471.750
472.250
−2.000
29,258
a.      How many of the March contracts are currently open?

b.     How many of these contracts should you sell if you wish to deliver 195,000 bushels of corn in March?

c.      If you actually make delivery, how much will you receive? Assume you locked in the settle price.

Note: Do not round intermediate calculations. Round your answer to the nearest whole number.

 

Problem 3-7 Option Profits (LO4, CFA4)
You purchase 10 call option contracts with a strike price of $60 and a premium of $1.95. Assume the stock price at expiration is $72.00.

a.      What is your dollar profit?

Note: Do not round intermediate calculations.

b.        What is your dollar profit if the stock price is $57.95?

Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations.

 

Problem 3-6 Futures Profits (LO3, CFA4)
The contract size for platinum futures is 50 troy ounces. Suppose you need 300 troy ounces of platinum and the current futures price is $890 per ounce. How many contracts do you need to purchase? How much will you pay for your platinum? What is your dollar profit if platinum sells for $940 a troy ounce when the futures contract expires? What if the price is $840 at expiration?

Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole number.

 

Problem 3-5 Bonds (LO1, CFA3)
You purchase 3,000 bonds with a par value of $1,000 for $984 each. The bonds have a coupon rate of 9.2 percent paid semiannually and mature in 10 years. How much will you receive on the next coupon date? How much will you receive when the bonds mature?

Note: Do not round intermediate calculations. Round your answers to the nearest whole number.

 

Problem 3-4 Earnings per Share (LO2)
You find a stock selling for $77.78 that has a dividend yield of 2.3 percent and a PE ratio of 21.5. What is the earnings per share (EPS) for the company?

Note: Round your answer to 2 decimal places.

 

Problem 3-3 Dividend Yields (LO2, CFA2)
You find a stock selling for $77.78 that has a dividend yield of 3.55 percent. What was the last quarterly dividend paid?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

 

Problem 3-2 Stock Quotations (LO2, CFA2)
You found the following stock quote for DRK Enterprises, Incorporated, at your favorite website. You also found that the stock paid an annual dividend of $0.74, which resulted in a dividend yield of 2.7 percent. Assume the company has 65 million shares of stock outstanding and a PE ratio of 19.

Company
Symbol
DAILY
YTD
52 WEEK
Volume
Close
Change
%Change
%Change
High
Low
%Change
DRK Enterprises
DRK
18,649,130
??
0.26
0.45%
8.73%
78.19
51.74
11.0%
What was net income for the most recent four quarters?

Note: Do not round intermediate calculations. Round your answer to the nearest whole number.

 

Problem 3-1 Stock Quotations (LO2, CFA2)

You found the following stock quote for DRK Enterprises, Incorporated, at your favorite website. You also found that the stock paid an annual dividend of $0.75, which resulted in a dividend yield of 1.60 percent.

Company
Symbol
DAILY
YTD
52 WEEK
Volume
Close
Change
%Change
%Change
High
Low
%Change
DRK Enterprises
DRK
18,649,130
??
0.26
0.55%
8.73%
78.19
29.46
11.0%
a.      What was the closing price for this stock yesterday based on today's closing price?

Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

b.     How many round lots of stock were traded?

Note: Round your answer to the nearest whole round lot.