Exam 16: Investment Concepts

When an investor short sells a stock, which entails borrowing a stock from another investor and selling it in the market with the promise to replace the stock at some later date, the investor who owns the stock that is borrowed must be informed that his or her stock is being used for a short sale.

Holding Period Return Portfolio -Refer to Portfolio.What was the two-year holding period return for the portfolio? Assume any dividend payments are included in the market value shown above.

A limit order, which is an order to trade at no worse than the price specified by the investor, is the most common type of order placed by investors.

The primary reason people invest is to supplement current income.

An investor purchased 1,000 shares of AZT stock on January 5, 2012 for $83.25 per share.On March 20, a dividend of $0.75 per share was paid.Fifty days later, on May 9, 2012, the stock was sold for $85.00.What is the holding period return? Assume the dividend is not reinvested.

An investor who short sells a stock will receive a margin call if the price of the stock decreases substantially.

At the beginning of 2010, Sally purchased Besham stock on margin.The initial margin requirement is 60 percent and the broker loan rate is 10 percent.Sally invested $15,000 of her own funds and margined the maximum amount allowed by the broker to purchase Besham stock.At the time, the purchase price of the stock was $50 a share.No dividends were paid during the year, and the stock was sold for $48 a share at the end of the 2010.What is the one-year holding period return for this investment?

An investor who trades on margin generally will receive a margin call when the stock price increases significantly because the broker needs to determine whether the investor wants to liquidate the position to take advantage of the profits that are available.

Use the information below to solve for the earnings per share for Landstar.

A bond with an annual coupon rate of 12 percent and face value of $1,000.00 was purchased for $990.00 and sold two years later for $1,050.00.What was the holding period return?

A middleman, or agent, who helps investors trade financial instruments such as stocks, bonds, and derivatives is called a(n)

An individual's risk tolerance level depends on existing economic conditions.For example, when the economy is doing well an individual is more likely to have lower risk tolerance level.

Even though the simple arithmetic average does not consider compounding, it is useful for determining the average return for a group of investments at one point in time.

An order to execute a trade at the best price available as soon as the transaction reaches the market is called a ____ order.

At the beginning of 2010, Steve purchased ACME stock on margin.The initial margin requirement is 50 percent and the broker loan rate is 8 percent.Steve invested $15,000 of his own funds and margined the maximum amount allowed by the broker to purchase ACME stock.At the time, the purchase price of the stock was $25 a share.No dividends were paid during the year, and the stock was sold for $32 a share at the end of the 2010.What is the one-year holding period return for this investment?

Investors are individuals who try to make a quick profit based on short-term market adjustments.

The one-year holding period returns for Cherokee Adventures for 2010 and 2011 are given below.If Cherokee's geometric average return for 2010 through 2012 was 15 percent, what was its implied one-year holding period return for 2012?

Geometric Average Return Foxy Ladies Investment Club The Foxy Ladies Investment Club purchased 100 shares of common stock each in Coca-Cola, Intel, and Merck on January 02, 2010.A summary of their portfolio is given below: -Refer to Foxy Ladies Investment Club.What was the portfolio's geometric average return per year from 2010 through 2012?

Your brokerage firm allows market trading with an initial margin requirement equal to 60 percent plus an 8 percent broker loan rate.You have $6,000 to invest.How many shares of ABC can you purchase on margin? ABC stock currently sells for $50 a share.

People who view investments as instruments that produce growth over a long period of time are referred to as