Investment第二章 总结&习题

Chapter 2

SUMMARY

1.Investors typically buy or sell securities through brokers who are

compensated for their services with commissions.

2.When transacting in a security, investors must specify the following: the

security's name, buy or sell, order size, time limit, and type of order.

3. The four standard types of orders are market, limit, stop, and stop limit. Market orders, followed by limit orders, are the most common types of orders.

4. Investors may purchase securities with cash or may borrow from brokerage firms to buy securities on margin.

5. Investors must make down payments on their margin purchases, maintain minimum level so f collateral in their margin accounts, and pay interest on margin loans.

6. If an investor's actual margin falls below the maintenance margin requirement, the investor's account is under margined. The investor will receive

a margin call and must increase the actual margin level in the account.

7. Buying on margin results in financial leverage, thereby magnifying (positively or negatively) the impact of a security's return on the investor's wealth.

8. Short sales involve the sale of securities that are not owned, but rather are borrowed by the sellers. The borrowed securities must ultimately be purchased in the market and returned to the lenders.

9. A short seller must deposit the proceeds of the short sale and initial margin with his or her broker. The short seller must also maintain a minimum actual margin level in his or her margin account or face a margin call.

10. For investors who purchase on margin or short sell several securities or do both, the determination of whether an account is under margined, restricted, or over-margined depends on the aggregated activity in their accounts. QUESTIONS AND PROBLEMS

1.Lollypop Killefer purchases on margin 200 shares ofLandfall Corporation

stock at $75 per share. The initial margin requirement is 55%. Prepare Lollypop's balance sheet for this investment at the time of purchase.

2.Buck Ewing opened a margin account at a local brokerage firm. Buck's

initial investment was to purchase 200 shares of Woodbury Corporation on margin at $40 per share. Buck borrowed $3,000 from a broker to complete the purchase.

a. At the time of the purchase, what was the actual margin in Buck's

account?

b. If Woodbury stock subsequently rises in price to $60 per share, what is

the actual margin in Buck's account?

c. If Woodbury stock subsequently falls in price to $35 per share, what is

the actual margin in Buck's account?

3.Snooker Arnovich buys on margin 1,000 shares of Rockford Systems stock

at $60 per share. The initial margin requirement is 50% and the maintenance margin requirement is 30%. If the Rockford stock falls to $50, will Snooker receive a margin call?

4.Cap Anson originally purchased 100 shares of Avalon Company's stock for

$13 per share on margin. The initial margin requirement is 60% and the maintenance margin requirement is 35%. To what price must the stock fall for Cap to receive a margin call?

5.Lizzie Arlington has deposited $15,000 in a margin account with a

brokerage firm. If the initial margin requirement is 50%, what is the maximum dollar amount of stock that Lizzie can purchase on margin?

6.Penny Bailey bought on margin 500 shares ofSouth Beloit Inc. at $35 per

share. The initial margin requirement was 45% and the annual interest on margin loans was 12%. Over the next year the stock rose to $40. What was Penny's return on investment?

7.Calculate Buck Ewing's rate of return in parts (b) and (c) of Problem 6

under the assumptions that the margin loan was outstanding for one year and carried an interest rate of 10% and that the prices of$60 and $35 were observed after one year during which the firm did not pay any cash dividends.

8.Ed Delahanty purchased 500 shares ofNiagara Corporation stock on

margin at the beginning ofthe year for $30 pershare.The initial margin requirement was 55%. Ed paid 13%interest on the margin loan and never faced a margin call. Niagara paid dividends of$1 per share during the year.

a. At the end of the year, if Ed sold the Niagara stock for $40 per share,

what would Ed's rate of return be for the year?

b. At the end of the year, if Ed sold the Niagara stock for $20 per share,

what would Ed's rate of return be for the year?

c. Recalculate your answers to parts (a) and (b) assuming that Ed made the Niagara stock purchase for cash instead of on margin.

9.Beauty Bancroft short sells 500 shares of Rockdale Manufacturing at $25

per share. The initial margin requirement is50%. Prepare Beauty's balance sheet as of the time of the transaction.

10.Through a margin account, Candy Cummings short sells 200 shares of

Madison Inc. stock for $50 per share. The initial margin requirement is 45%.

a. If Madison stock subsequently rises to $58 per share, what is the actual

margin in Candy's account?

b. If Madison stock subsequently falls to $42 per share, what is the actual

margin in Candy's account?

11.Dinty Barbare short sells 500 shares of Naperville Products at $45 per share.

The initial margin and maintenance margin requirements are 55% and 35%,

respectively. If Naperville stock rises to $50, will Dinty receive a margin call?

12.Willie Keeler short sold 300 shares of Sun Prairie Foods stock for $42 per share. The initial margin requirement is 50% and the maintenance margin requirement is 40%. To what price can the stock rise before Willie receives a margin call?

13.The stock of DeForest Inc. traded at the beginning of the year for $70 per

share. At that time Deerfoot Barclay short sold 1,000 shares of the stock.

The initial margin requirement was 50%. DeForest stock has risen to $75 at year-end, and Deer foot faced no margin calls in the interim. Further, the stock paid a $2 dividend at year-end. What was Deerfoot's return on this investment?

14.Calculate Candy Cummings's rate of return in parts (a) and (b) of Problem

17, assuming that the short loan was flat but the initial margin deposit earned interest at a rate of8% and that the prices of$58 and $42 were observed after one year during which the firm did not pay any dividends.

15.Pooch Barnhart purchases 100 shares of Batavia Lumber Company stock

on margin at $50 per share. Simultaneously, Pooch short sells 200 shares of Geneva Shelter stock at $20 per share. With an initial margin requirement of60%:

a.What is the initial equity (in dollars) in Pooch's account?

b. If Batavia and Geneva rise to $55 and $22 per share, respectively,

what is Pooch's equity position (in dollars)?

16.On May 1, IvyOlson sold short 100 shares ofMinnetonka Minerals stock at

$25 per share and bought on margin 200 shares ofSt. Louis Park Company stock for $40 per share. The initial margin requirement was 50%. On June 30, Minnetonka stock sold for $36 per share and St. Louis Park stock sold for $45 per share.

a. Prepare a balance sheet showing the aggregate financial position on

Ivy's margin account as ofJune 30.

b. Determine whether Ivy'saccount is restricted as ofJune 30.