1. A bond investor is considering two 10 year maturity bonds both rated AAA: the municipal bond is yielding 1.15% and the corporate bond is yielding 2.10%. At what marginal tax rate would the bond investor be indifferent between the two bonds? Enter your answer rounded off to two decimal points.
2. You want to form a price–weighted technology stock index using Apple, Google, and Microsoft. Apple’s adjusted closing price for 2015 is $112.75 and for
2014 is $100.78;Google’s adjusted closing price for 2015 is $647.82 and for 2014 is $582.36; Microsoft’s adjusted closing price for 2015 is $43.52 and for
2014 is $44.25. What is the annual return for your price–weighted technology stock index for 2015?
3.You want to form avalue–weightedtechnology stock index using Apple, Google, and Intel. Apple’s adjusted closing price for 2015 is $112.75 and
for 2014 is $100.78; Google’s adjusted closing price for 2015 is $647.82 and for 2014 is $582.36; Intel’s adjusted closing price for 2015 is $28.54
and for 2014 is $33.92. The additional information that you gathered is their market values at the end of 2014 or beginning of 2015; in billions of dollars,
Apple’s market value is $574.72 B, Google’s market value is $399.23 B, and Intel’s market value is $164.35 B. What is the annual return for your
value–weighted technology stock index for 2015?
4. You purchased 100 shares of Amazon common stock on margin at $512.89 per share. Assume the initial margin is 50% and the
maintenance margin is 30%. One year later, the stock price closes at $772.44. If the broker’s call loan rate is 2.00%, what is your return on equity?
Note that Amazon pays no dividends.
5. You sold short 100 shares of British Petroleum common stock on margin at $33.54 per share. Assume the initial margin is 50% and the maintenance margin is 30%. One year later, the stock price closes at $27.01, and it has paid cash dividends of $2.40 per share. What is your return on equity? Ignore margin interest.