Investment Management Learning Questions

1. A tax exempt money market fund has an annual return of 3.82 percent. What is your equivalent taxable rate if you are in a 32 percent marginal tax bracket?

2. You purchased 500 shares of SLG, Inc. stock at a price of $40.20 a share. You then purchased put options on your shares with a strike price of $47.50 and an option premium of $1.90. At expiration, the stock was selling for $48.30 a share. You sold your shares on the option expiration date. What is your net profit or loss your transactions related to SLG Inc. stock?

3. You just sold short 700 shares of Highway Construction stock for $31 a share. The initial margin requirement is 70 percent and the maintenance margin is 35 percent. Construct a balance sheet depicting this transaction.

4. The Stone Wall Fund has an offer price of $32.90 and a front-end load of 3.25 percent.
What is the net asset value?

5. Last week, you sold short 400 shares of stock for $33 a share. The initial margin requirement is 65 percent and the maintenance margin is 30 percent. Today, that stock is selling for $36 a share. Construct a balance sheet for this short sale reflecting today's values.

6. The Blue Star Fund has assets with a market value of $10.3 million and liabilities of $207,000.
What is the net asset value if there are 175,000 shares outstanding?

7. Aaron purchased 200 shares of a technology stock for $14.80 a share. The initial margin requirement on this stock is 85 percent and the maintenance margin is 60 percent. What is the lowest the stock price can go before he receives a margin call?

8.The Atlas Mutual Fund owns the following stocks:

Stock x
shares 2600
stock price $48

Stock Y
shares 3800
stock price $ 69

Stock Z
shares 1900
stock price $ 26

The fund has no liabilities and has 65,000 shares outstanding. What is the NAV?

9. You invest $4,800 in a money market fund at the beginning of the year. The fund's assets appreciate by 2.7 percent over the year. How many shares of the fund do you own at the end of the year?

10. The European Growth Fund has $920 million in assets and $68,000 in liabilities. There are 29.6 million shares outstanding. The fund charges a 4.5 percent front-end load. What is the offering price?

11. Matt owns 724.08 shares of a fund which has a current NAV of $44.17. He has owned all of these shares for 3.3 years. The fund charges a contingent deferred sales charge which starts at 6 percent for the first year and declines by 1 percent each year. How much cash will he receive if he redeems all of his shares today?

12. At the beginning of the year, you invested $4,000 in a no-load mutual fund with a NAV of $20.00. At the end of the year, the fund distributed $1.06 in short-term earnings and $3.10 in long-term earnings. The end of year NAV was $19.42. What was your annual rate of return on this investment?