1. Three years ago, you purchased 203 shares of IBM stock for $164 a share. Today, you sold your IBM stock for $172 a share. For this problem, ignore commissions that would be charged to buy and sell your IBM shares and dividends you might have received as a shareholder. (a) What is the amount of profit you earned on each share of IBM stock?(b) What is the total amount of profit for your IBM investment?
2. Mike Jackson invested a total of $16,100 in the New Colony Pacific Region mutual fund. The management fee for this particular fund is 0.40 percent of the total asset value. Calculate the management fee Mike must pay this year. (Round your answer to 2 decimal places.)
3. You have $15,000 in your retirement fund that is earning 5.5 percent per year, compounded quarterly. How many dollars in withdrawals per month would reduce this nest egg to zero in 20 years? (Use Exhibit 18-16)
withdrawal rate
4. Barry and his wife Mary have accumulated over $6 million during their 51 years of marriage. They have nine children and eleven grandchildren. How much money can Barry and Mary gift to their grandchildren in 2016 without any gift tax liability?
5. As a stockholder in Bozo Oil Company, you receive its annual report. In the financial statements, the firm has reported assets of $10 million, liabilities of $6 million, after-tax earnings of $3 million, and 826,000 outstanding shares of common stock.
(a) Calculate the earnings per share of Bozo Oil’s common stock. (Round your answer to 2 decimal places.)
(b) Assume a share of Bozo Oil’s common stock has a market value of $40, what is the firm’s price-earnings ratio? (Round your intermediate calculation to 2 decimal places and final answer to the nearest whole number.)
(c) Calculate the book value of a share of Bozo Oil’s common stock. (Round your answer to 2 decimal places.)
6. After researching Best Buy common stock, Sally Jackson is convinced the stock is overpriced. She contacts her account executive and arranges to sell short 350 shares of Best Buy. At the time of the sale, a share of common stock had a value of $54. Three months later, Best Buy is selling for $57 a share, and Sally instructs her broker to cover her short transaction. Total commissions to buy and sell the stock were $79. What is her profit for this short transaction?
7. Assume that one year ago, you bought 280 shares of a mutual fund for $25 per share and that you received an income dividend of $0.15 cents per share and a capital gain distribution of $0.36 cents per share during the past 12 months. Also assume the market value of the fund is now $22 a share. Calculate the total return for this investment if you were to sell it now. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)
8. Sandra Waterman purchased a 52-week, $1,600 T-bill issued by the U.S. Treasury. The purchase price was $1,597.
(a) What is the amount of the discount?
(b) What is the amount Ms. Waterman will receive when the T-bill matures?
(c) What is the current yield for the 52-week T-bill at the time of purchase? (Enter your answer as a percent rounded to 2 decimal places.)
9. James McCulloch purchased a 20-year U.S. Treasury bond four years ago and paid the face value of $4,500. The bond paid 3.300 percent annual interest. Four years later he sold the bond for $4,540.
(a) What is the annual interest amount for the bond? (Round your answer to 2 decimal places.)
(b) What is the total interest Mr. McCulloch earned during the four-year period? (Round your answer to the nearest whole number.)
(c) What is the total return for Mr. McCulloch's bond investment? (Round your answer to the nearest whole number.)