Assignment 1:

1) Suppose investors can earn a return of 1.5% per 3 months on a treasury note with 6 months remaining until maturity. What price would you expect a 3-month maturity treasury bill to sell for?

2) What is the after-tax return to a corporation that buys a share of preferred stock at $35, sells it at year-end at $35, and receives a $5 year-end dividend? The firm is in the 20% tax bracket.

3) An investor is in a 30% tax bracket. If a municipals bond offer a return of 6.75%, what is the equivalent taxable yield for this the investor?

4) Both a call and a put currently are traded on stock XYZ; both have strike prices of $80 and expirations of 6 months. What will be the profit to an investor who buys the call for $5 in the following scenarios for stock prices in 6 months? What will be the profit in each scenario to an investor who buys the put for $7?

a. $70

b. $75

c.$80

d.$85

e. $90

5) You purchased a futures contract on corn at a futures price of 350 and at the time of expiration the price was 352. What was your profit or loss? There are 5,000 bushels per contract and prices are quoted in cents per bushel.