Problem 2-3
Which of the following correctly describes a repurchase ?
a 161.1875
par 1000
price 1611.875
Problem 2-7
Refer to Figure 2.3 and look at the Treasury bond maturing in May 2030.
a.How much would you have to pay to purchase one of these bonds? (Do not round intermediate calculations. Round your answer
to 3 decimal places. Omit the “$” sign in your response.)
Problem 2-8
Suppose investors can earn a return of 2% per 6 months on a Treasury note with 6 months
remaining until maturity. The fact value of the T-bill is $10,000. What price would you expect a 6–
month maturity Treasury bill to sell for? (Round your answer to 2 decimal places. Omit the “$”
Problem 2-9
Find the after-tax return to a corporation that buys a share of preferred stock at $40, sells it at year-end at $40,
and receives a $4 year-end dividend. The firm is in the 30% tax bracket.
(Do not round intermediate calculations.
Data
General dynamics
price 64.69
Problem 2-10
Refer to Figure 2.8 and look at the listing for General Dynamics.
a.How many shares could you buy for $5,000? (Round your answer to 2 decimal places.)
d.What was the firm’s closing price on the day before the listing? (Round your answer to 2 decimal places. Omit the “$” sign in your
response.)
amount available 5000
Data 1 2
P0Q0P1Q1P2Q2
A 90 100 95 100 95 100
Problem 2-11
Consider the three stocks in the following table. Ptrepresents price at time t, and Qtrepresents shares outstanding at
time t. Stock C splits two for one in the last period.
a.Calculate the rate of return on a price-weighted index of the three stocks for the first period (t= 0 to t= 1).(Do not round intermediate
calculations. Round your answer to 2 decimal places. Omit the “%” sign in your response.)
B 50 200 45 200 45 200
C 100 200 110 200 55 400
P0 Q0 P1 Q1 P2 Q2
A 90 100 95 100 95 100
Problem 2-12
Consider the three stocks in the following table. Ptrepresents price at time t, and Qtrepresents shares outstanding at time t. Stock C splits
two for one in the last period.
Data
Problem 2-13
An investor is in a 30% tax bracket. If corporate bonds offer 9% yields, what must municipals offer for the investor
to prefer them to corporate bonds? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)
Problem 2-14
Find the equivalent taxable yield of a short-term municipal bond currently offering yields of 4% for tax brackets
of zero, 10%, 20%, and 30%. (Round your answers to 2 decimal places. Omit the “%” sign in your response.)
Problem 2-16
Which security should sell at a greater price?
a.A 10-year Treasury bond with a 9% coupon rate versus a 10-year T-bond with a 10% coupon.
A 10-year T-bond with a 10% coupon.
b.A 3-month expiration call option with an exercise price of $40 versus a 3-month call on the same stock with an exercise price of $35.
Problem 2-17
Look at the futures listings for the corn contract in Figure 2.11.
a.Suppose you buy one contract for March delivery. If the contract closes in March at a level of 787.25, what will your profit be? (Omit the “$” sign
in your response.)
b.How many March maturity contracts are outstanding?
January S(X)= 180
a price 193 yes profit 13
cost 12.58
net profit 0.42
Problem 2-18
Refer to Figure 2.10 and look at the IBM options. Suppose you buy a January 2013 expiration call option with exercise price $180.
a-1.Suppose the stock price in January is $193. Will you exercise your call?
a-2.What is the profit (loss) on your position? (Input the amount as a positive value. Round your answer to 2 decimal places. Omit the “$” sign in your response.)
cost 12.58
net profit -4.58
cost 12.01
net profit -12.01
Data
strike price 50
t 0.5 1/2 year 1
a stock price profit
40 -4
45 -4
50 -4
55 1
60 6
Problem 2-20
Both a call and a put currently are traded on stock XYZ; both have strike prices of $40 and expirations of 6
months.