FIN3702A Semester 2 Mock Test 1, S2 2021

1 You want to purchase GM stock at $10 from your broker using as Little of your own money as possible. If initial margin is 60% and you hate $400 to invest, how man shares can you bu? A.200 shares B 300shares C. 400 shares D. 600 shares E 800shares 2. Assume you sold shon 100 shares of common stock at $40 per share The initial margin 1s 50%. What would be the maintenance margm if a margin call is made at a stock pnce of S507 A. 40% B.20% C.35% D.25% E. None of the above 3 You are evaluating two mvestment alternative. One is a passive market portfolio wnth an expected return of 8% and a standard deviation of The other ts a fund that 1s actively managed by your broker Thus fund has an expected return of 15% and a standard deviation f 16%. 12%. What is the maximum fee your broker could charge and still leave you as well off as gs 5%. The risk-free rate currently you had invested in the passive market fund if A. 4.00% B 433% C.6.00% D 7.00% E. none of the abore is The following statement used for answer Q4 and Q5, Assume an investor with the following utility function. U = E(r) 3/2(), where E() is the return and ts the standard de1aton