SM EXERCISE

SM EXERCISE Suppose that you sell short 100 shares of IBX, now selling at $70 per share a What is your maximum possible loss? b What happens to the maximum loss if you simultaneously place a stopbuy order at $78? Dee Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per share She borrows $4,000 from her broker to help pay for the purchase The interest rate on the loan is 8% a What is the margin in Dee’s account when she first purchases the stock? b If the price falls to $30 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 30%, will she receive a margin call? c What is the rate of return on her investment? Old Economy Traders opened an account to short sell 1,000 shares of Internet Dreams from the previous problem The initial margin requirement was 50% (The margin account pay no interest) A year later, the price of Internet Dreams has risen from $40 to $50, and the stock has paid a dividend of $2 per share a What is the remaining margin in the account? b If the maintenance margin requirement is 30%, will Old Economy receive a margin call? c What is the rate of return on her investment? Suppose that Intel currently is selling at $40 per share You buy 500 shares, using $15,000 of your own money and borrowing the remainder of the purchase price from your broker The rate on the margin loan is 8% a What is percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to (i) $44, (ii) $40,(iii) $36? What is the relationship between your percentage gain or loss and the percentage change in the price of Intel? b If the maintenance margin is 25%, how low can Intel’s price fall before you get a margin call? c How would your answer to (b) change if you had financed the initial purchase with only $10,000 of your own money? What is the rate of return on your margined position (assuming again that you invest $15,000 of your own money) if Intel is selling after year at (i) $44, (ii) $40, (iii) $36)? What is the relationship between your percentage return and the percentage change in the price of Intel? Assume that Intel pays no dividends d Continue to assume that a year has passed How low can Intel’s price fall before you get a margin call? You have borrowed $20,000 on margin to buy shares in Disney, which is now selling at $40 per share Your account starts at the initial margin requirement of 50% The maintenance margin is 35% Two days later, the stock price falls to $35 per share a Will you receive a margin call? b How low can the price of Disney shares fall before you receive a margin call? Consider the three stocks in the following table P t represents price at time t, and Qt represents shares outstanding at time t Stock C splits two for one in the last period Po Qo P1 Q1 P2 Q2 A 90 100 95 100 95 100 B 50 200 45 200 45 200 C 100 200 110 200 55 400 a Calculate the rate of return on a price – weighted index of the three stocks for the first period (t=0, t=1) b What must happen to the divisor for the price – weighted index in year 2? c Calculate the rate of return for the second period (t = to t =2) d Calculate the first-period rates of return on the following indexes of the three stocks: i A market-value-weighted index….ii An equally weighted index FBN, Inc , has just sold 100,000 shares in an initial public offering The underwriter’s explicit fees were $70,000 The offering price for the shares was $50, but immediately upon issue the share price jumped to $53 a What is your best guess as to the total cost to FBN of the equity issue? b Is the entire cost of the underwriting a source of profit to the underwriters? You are looking to investment securities by involving with the purchase of shares listed on the market You go to the securities company and open a trading account and deposit $7,000 You plan to buy shares VNM a On 12/12/2010, the stock price of VNM is $8.5per share, if you want to buy 1000 shares VNM, what you do? b Suppose that ten days later the share price of VNM decrease to $6 per share Will you receive a margin call? What happen if you don’t meet the margin call? Assuming that: - Maintenence margin is 80% - Brokerage fees are 0.3% of transaction value - Interest rate is 0.1% / day 9 Assume that the last execution price before the call market period of that day was 24.000 VND, the trading system selected period of 14:30 – 14:45 as the closing session, and at that time, there were orders of stock XYZ as below Determine the closed price of XYZ company stock? Buying Order Price Selling order 600 (A) 24000 700 (F) 1700 (B) 24300 1500 (G) 2200 (C) 24900 4000 (H) 3000 (D) 25000 2400 (I) 2300 (E) ATC 1200 (K) a Determine the trading result? b Calculate the brokerage fee of investor K and investor E The brokerage fee rate is 0,35% 10 Assume that during the morning trading section, the trading system receive orders of stock ABC as below Based on continuous orders matching, determine the results of this stock Time Investor Buying quantitative Price Selling quantitative Price 9h16 A 3000 9h17 B 1000 35 9h18 C 2500 35.4 9h19 D 9h20 E 3200 MP 3000 35.5 35.6 11 Joint- stock company A announces they will issue 18000 new shares by multi-price share auction Starting price is 30000/share All information about price and quantity of each investor is as follow Investors Asking price (1000 Quantity VND) A 30 7000 B 30.1 6000 C 30.5 3600 D 31 3000 E 31.5 2000 F 31.8 1150 a Determine who success share auction and the price and quantity they could buy investors in this b Determine the average price 12 An Dutch Bond Auction for raising 500 Billion Dong for Forever A Loan Corporation is shown in the following table: Name of Investors (Bidders) Interest Rate (%) Auction volume ( Billion Dong) A 100 B 7.35 250 C 7.4 150 D 7.5 70 E 7.55 300 F 7.85 80 a Determine auction results (realized interest rates and volume for that auction and each bidder) b Does the 0% rate affect the result of the auction, try to explain why the investor bid 0% 13 On Oct 16, 20X7, no-right trading day (the day that stock purchasers will has no rights related to stocks bought on) of Cash-Dividend Payment with 20% paying rate, continuous trading data of XYZ shares (HNX) is shown in the following table: Time Buying Number Selling Price of shares (1000VND/ share) Number of shares Price (1000VND per share) 9h35 (A)1200 36.5 - - 9h40 - - (B) 4000 36.6 (D) 500 36.4 (F) 6000 36.5 9h41 9h42 (C) 6300 MP 9h43 36.8 9h44 ( E) 500 a) Determine the matching prices and trading volume for each time b) Providing that an investor’s trading account on Oct 15, 20X7 is detailed as following, determine cash dividends that investor would receive Name of share Average purchasing price Number of shares ACB 16.1 3000 XYZ 37.3 9000 14 An Dutch stock auction for issuing 300.000 shares for an corporation is shown in the following table: Name of Investors (Bidders) Price (1000 VND Auction volume (thousands per share) of shares) A 20 80 B 19.8 100 C 19.5 50 D 19.1 120 E 19 110 F 18.5 60 Determine auction results (realized price and volume for that auction and each bidder) 15 A call auction database of XYZ shares is as following: Buying order Price Investors Number of shares A 3500 Selling orders Number of shares Investors ATO - - B 2700 25.6 5000 G C 1300 25.8 2800 H D 4600 26 200 I E 4000 26.2 - F 800 26.5 1200 K Determine trading results (matching price and trading volume for that call auction and for each investor) 16 Mekong Fisheries Joint Stock Company (AAM, listed on HOSE) announces its dividend payment policy for the year 2012 as following: Share Code Face value AAM Record Date VND 10000 June 7, 2013 (Friday) Dividend payment ratio In cash: 30% In shares: 20% Determine AAM’s market price on ex-date Suppose that AAM’s closingprice on June 4, 2013 is VND 44700, and the payment process of Vietnam’s stock market is T+3 17 ThangLong Invest Group (TIG, listed on HNX) discloses information related to its share dividend payment policy as following: - Ex-date: August 01, 2017 (Tuesday) - Record-date: August 02, 2017 (Wednesday) - Content: Paying dividend in shares for outstanding investors - Dividend payment ratio: 20:1 (An investor with 20 outstanding shares receives 01 new share) - Rounding rule: The number of new shares that investors can receive under TIG’s share dividend payment policy are rounded down to units before the decimal sign (for example: if the investor A, based on TIG’s policy, can receive 111.1 shares, after rounding, he/she receive 111 shares only) Determine TIG’s market price on the ex-date, given TIG’s closing prices on following days: Share code TIG Jul 31 Jul 28 Jul 27 Jul 26 Jul 25 VND 4400 VND 4600 VND 4600 VND 4600 VND 4500 The payment process of Vietnam’s stock market is T+2 18 Van Phat Hung Corporation (VPH, listed on HOSE) releases information on their coming issuance of share purchase rights to outstanding investors Summary of the company’s announcement is as below: - Type of shares: Common shares - Face Value: VND 10000 - Ex-date: Oct 31, 2017 (Tuesday) - Record-date: Nov 01, 2017 (Wednesday) - Issuing price: VND 10000 - Issuing ratio: 5:1 (01 outstanding share is equivalent to 01 share purchase right, and 05 share purchase right could be used to buy 01 new share under the coming issue) - Rounding rule: the number of new shares that investors could buy based on their outstanding shares and rights are rounded down to units before the decimal sign (for example: if the investor A has share purchase rights to buy up to 24.2 share, after rounding, he/she could buy 24 shares only) - Registration and payment for executing rights: Nov 07, 2017 – Dec 04, 2017 a/ Determine VPH’s market price on the ex-date, and the value of share purchase right Given that: Payment process of Vietnam’s stock market is T+2 Closing price of VPH shares on Oct 30, 2017 is VND 12900 b/ Suppose that an investor A is holding 5000 VPH shares on Oct 26, 2017 Determine (1)-the number of new shares that A could buy, (2) value of all the rights A has, (3) -the amount of money that A has to pay VPH to execute all rights that A owns, for each of following cases (from b.1 to b.9): b.1 A continues to hold 5000 VPH shares until Dec 31, 2017 b.2 A sells 5000 VPH shares on Nov 08, 2017 (Wed.) b.3 A sells 5000 VPH shares on Oct 27, 2017 (Friday) b.4 A sells 5000 VPH shares on Oct 31, 2017 (Tue., ex-date) b.5 A sells 5000 VPH shares on Nov 01, 2017 (Wed., Record date) b.6 A buys 2000 VPH shares on Oct 30, 2017 (Mon.) b.7 A buys 3000 VPH shares on Oct 31, 2017 (Tue, ex-date) b.8 A sells 3000 VPH shares on Oct 30, 2017 (Mon.) b.9 A sells 5000 VPH shares on Nov 08, 2017 (Wed.) c/ Determine A’s investment profit by Dec 29, 2017 for each of cases listed above (b.1 – b.9.), Given that: VPH shares’ closing price on Dec 29, 2017 is VND 11250; A sells all his VPH shares on Dec 29, 2017 with closing price; A did not place any other buy/sell orders between Oct 26 and Dec 28, except for orders specified in above cases (b.1 to b.9)