FIN 421 Practice Final Exam Spring 2016 Questions with Answers: Arizona State University

Practice Final Exam FIN 421 Spring 2016 Name: Student ID: Section: 10951 (T/Th) 10950 (T only) Part I / 40 Part II / 20 Part III / 40 Total / 100 • You have 110 minutes to complete this exam. • Only calculator and pen are allowed. A formula sheet is provided on the last pages. • You are to answer these questions without consulting anyone. • Show your work wherever necessary. • Manage your time wisely. Shorter answers are often better. Part I. Multiple Choice Questions (5 points each) Choose only one answer for each question and write the corresponding letter in the table below. No justifications required. Question Answer 1 2 3 4 5 6 7 8 1. Consider the following limit order book of a specialist in a market that allows partial execution of orders. The last trade in the stock took place at a price of $35. Bid Bid Qty Ask Qty Ask 34.75 100 800 35.25 34.25 100 1,000 35.50 33.50 400 2,000 35.75 32.25 200 800 36.00 You place a market sell order for 150 shares. What are your proceeds and what is the new stock price? A) $5,187.50 ; $34.75 B) $5,187.50 ; $34.25 C) $5,325.00 ; $35.00 D) $5,287.50 ; $35.25 E) $5,287.50 ; $35.00 Answer: B Determining proceeds: Since you are trying to sell shares, you look to the bid price column to see what people are willing to pay for the shares. You are able to sell 100 shares at $34.75 and 50 shares at $34.25 100 shares × $34.75 + 50 shares × $34.25 = $5,187.50 Determining new stock price: The stock price is the last price the stock was purchased for. In this case, it is the price you sold your last 50 shares for, which is $34.25.