FIN 4305 (Investments) – Test HW 2 with Answers – June 2022 (100 out of 100 Points)

FIN 4305 (Investments) – Test HW 2 with Answers – June 2022 (100 out of 100 Points) Questions 1. The divisor used in a price-weighted index will increase whenever a stock within the index undergoes a reverse stock split. 2. Number of shares Closing Prices Company outstanding Year T Year T + 1 W 1,500 $22.00 $18.00 X 2,500 35.00 25.00 Y 2,000 10.00 15.00 Z 3,000 50.00 48.00 Find the percentage change of a value-weighted index consisting of these four stocks from years T to T+1. Round your final answer to four decimals and enter your answer in decimal format (EX:.XXXX) 3. The following table shows the price movements of three stocks that comprise a price-weighted index. Use this table to answer the next two questions. Stock Price Date X Y Z Jan. 2, 2012 40 100 150 Jan. 3, 2012 12 95* 170 Jan. 4, 2012 14 22 165** Jan. 5, 2012 12*** 24 85 *4:1 split on stock Y after close on 1/3/2012 **2:1 split on stock Z after close on 1/4/2012 ***3:4 reverse split on stock X after close on 1/5/2012 The base date for the index is Jan. 2, 2012 Calculate the divisor used for the opening of Jan. 6, 2012. Round intermediate steps and your final answer to four decimals. 4. Find the percentage change in the index from 1/4-1/5. Round intermediate steps and your final answer to four decimals. 5. Assume the following information concerning two stocks that make up an index. What is the value-weighted return for the index? Assume the following information concerning two stocks that make up an index. What is the value-weighted return for the index? 6. Shares of stock owned by an individual but held in a brokerage firm's name for ease of trading are said to be held in street name. 7. Which of the following is a flaw of price-weighted indices? 8. You just placed a stop limit order to sell 100 shares at $21 stop, $18 limit. Which one of the following statements is correct concerning this order if the current market price is $16? 9. You want to sell 600 shares of DEF stock at the going market price after the stock reaches $42 a share. Which type of order should you place? 10. The commission structure on a stock purchase is $35 plus $0.02 per share. If you purchase seven round lots of a stock selling for $98, what is the total amount in commissions that you'll pay? 11. Use the following information to answer the next three questions. Price Shares (millions) 1/1/13 1/1/14 1/1/15 Douglas McDonnell 200 $ 70 $ 73 $ 87 Dynamics General 300 51 46 60 Find the rate of return for an unweighted index from . Round intermediate steps and your final answer to four decimals. Enter your final answer in decimal format (EX: .XXXX) 12. Find the rate of return for an equally weighted index from . 13. Find the rate of return for an equally weighted index from . 14. Use the following information to answer the next two questions. Buy Orders Sell Orders Shares Price Shares Price 1000 25.14 800 25.95 500 25.08 900 26.05 750 24.95 650 26.15 600 24.80 1200 26.30 Suppose you placed a market buy order for 1200 shares. How much would you pay for the stock? 15. Suppose you place a market order to sell 2000 shares. How much would you receive for your stock? 16. Which of the following order types could be used to mitigate potential losses from a short sale? 17. Which one of the following best describes a broker? 18. Over-the-counter market activity is reflected in the Nasdaq index. 19. Marcus just placed a stop limit order to buy 100 shares at $20 stop, $25 limit. Which one of the following statements is correct concerning this order if the current market price is $19? 20. D, E, and F are the only three stocks in an index. The stocks sell for $89, $400, and $96, respectively. If D undergoes a 2-for-3 reverse stock split, what is the new divisor? Round intermediate steps to four decimals.