1. Robert is close to retirement and has savings of $200,000. Using these funds he creates a portfolio of large-cap, dividend-paying stocks and investment grade corporate bonds. Robert would best be characterized as a (n):

A. hedger.
B. investor.
C. information-motivated trader.

 

2. Alex has purchased 100 shares of a non-dividend-paying firm on margin at a price of $60 per share. The leverage ratio is 1.5. Six months later, he sells these shares at $70 per share. What was the return to Alex during the six-month period, considering no transaction cost or interest on borrowing?

A. 16.67 percent.
B. 66.67 percent.
C. 25.00 percent.

 

3. Susan purchased 600 shares of a company XYZ at $22 per share. The stock was bought on 80percent margin. One month later, Susan had to pay interest on the amount borrowed at a rate of 4percent per month. At that time, Susan received a dividend of $0.60 per share. Immediately after that she sold the shares at $18 per share. She paid commissions of $5 on the purchase and $5 on the sale of the stock. What was the rate of return on this investment for the one-month period?

A. -19.4 percent.
B. -20.4 percent.
C. -24.9 percent.

 

Tomorrow’s questions of the day will be on the topic of R46: Security Market Indices.

 

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