PART I $(12$ Marks$)$

REQUIRED

a$.$ Explain two risks associated with investing in stocks. $(2$ Marks$)$

b$.$ Name and describe two common measures that are used to measure the risk of a particular investment. $(4$ Marks$)$

c$.$ In your own words, explain the term $$diversification$$ and provide one example of how an individual can diversify their investment portfolio. $(2$ Marks$)$

d$.$ Answer the four multiple choice questions below $(4$ Marks$)$:

i$)$ You bought IBM stock at $$70$ per share. It is now $$120$ a share. You think it could go higher, but you are nervous that it could go down and you would lose your gains. To protect your gains but still give yourself the chance to make future profits, you could place a$...$

A$)$ limit order to sell for $$130$ a share.

B$)$ sell stop order at $$110$ a share.

C$)$ limit order to sell for $$110$ a share.

D$)$ sell stop order at $$130$ a share.

ii$)$ What is the total maximum number of TIC Inc. shares that could be purchased on margin if you have $$6,000$ of your own money to invest if the market price is $$20$ per share, and the margin requirement is $50$ percent?

A$)900$ shares

B$)300$ shares

C$)600$ shares

D$)428$ shares

iii$)$ You purchased stock worth $$10,000$ on margin $(50$ percent is the margin requirement$).$ Now the value of your stock has declined to $$7,000,$ and you receive a margin call. How much cash do you need to bring the margin back to the minimum level?

A$)$ $$1,500$

B$)$ $$3,000$

C$)$ $$5,000$

D$)$ $$2,000$

iv$)$ When placing an order to buy or sell a stock, you must specify all of the following except...

A$)$ ticker symbol.

B$)$ margin requirement.

C$)$ number of shares being purchased$/$sold$.$

D$)$ whether it is a market order or limit order purchase$/$sale$.$

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PART II $(12$ Marks$)$

PART II $($a$)(6$ Marks$)$

For each simple interest question below, please show your assumptions and work for each variable of the applicable formula as best as possible:

a$.$ What rate of interest did you earn over a period of $67$ days on an investment of $$7,500$ where you received an interest payment of $$150?$

b$.$ How many days did it take for your investment of $$5,000$ to earn $$175$ in interest at a rate of $4\%?$

PART II $($b$)(6$ Marks$)$

For each TVM question below, please show your assumptions and work for each variable of the TVM formulas as best as possible. To receive full marks for each question, the answer provided must include the correct values used for: N$,$ I$/$Y$,$ PV$,$ PMT$,$ FV$,$ P$/$Y and C$/$Y; not just a final answer:

a$.$ Juan would like to give his newly born grandson a gift of $$18,000$ on his eighteenth birthday. Juan would like to know what rate of return, compounded monthly, he must earn on a tax$-$free investment account if he deposits $$1,000$ today and makes regular monthly deposits of $$50$ per month at the end of each month. What is Juan$$s required rate of return?

b$.$ Amy and Vince want to save $$7,000$ so they can take a trip to Prince Edward Island in four years. How much must they save each month to have the money they need if they can get $8$ percent interest compounded semi$-$annually on their savings?