Quiz #1 Finance 333 Investments Name: ____________ Professor Yan ID: _______________ 1. Consider a T-bill with a $10,000 face value, 180 days to maturity and a current price of $9,800. What is the Bank Discount Yield? What is the Bond Equivalent Yield? What is the Effective Annual Yield? 2. The current market prices for IBM are $76.05 - $76.10. What is the bid-ask spread? How much does it cost you to buy 100 shares of IBM if you place a market order (excluding commission)? If you place a limit sell order at $76.08, will your order be executed immediately? Briefly explain (one sentence). 3. The yield of a municipal bond is 6%. The yield of an otherwise identical corporate bond is 8%. If you are indifferent between these two bonds, what must be your marginal tax rate?

4. Margin is the percentage of the investment that is not borrowed. If you bought 400 shares of IBM stock at $50 per share and borrowed $5,000, what is your initial margin? If the maintenance margin is 40%, at what price you will receive a margin call? 5. You sell short 100 shares of XYZ at $50 per share. If the initial margin is 50%, how much money do you need to put in your account? If the price goes down to $40, how much money do you make or lose? If the price goes up to $55, what is your margin?

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