X HELP CENTER Question 6 0 / 20 pts You are given the following T-bill quotations as of the close of trading on June 1. T-bill Maturity Bid Asked June 30 9.00% 8.80% 1) (8 points) At the end of June 1, how much would you have to pay to purchase $1 million in par value of the bills? 2) (12 points) Assume you purchased $1 million in par value of the bills on June 1 and later sold it on June 10 at $994,986.11. 2-1) Calculate the annual compound return. 2-2) Calculate the annual simple return. Your Answer: 1. I have to pay to purchase $1 million on par value of the bills: $1,000,000 x 8.80% = $ 88,000 2) 2-1) Annual compound return: Over the course of 10 months investment grew from $1 million to $994,986.11. Its compound annual growth rate (CAGR) is - 5% 2-2) Annual simple return: ($994,986.11 - $1,000,000) / $1,000,000 - 0.005HELP CENTER Question 7 2 / 20 pts Mr. Carver has just opened a margin account with a local brokerage firm. The firm has a policy of 60% initial margin and 40% maintenance margin. Mr. Carver initially buys 100 shares of a stock at $50 per share on margin. 1) (4 points) What are his (a) initial equity and (b) loan balances? 2) (7 points) To what price may the security decline before a margin call is required? ($**.* *) 3) (9 points) If the stock suddenly falls to $25 per share and the broker requires that the maintenance requirement be restored, how many shares must be sold to restore the maintenance margin? Your Answer: 1. a) Initial equity: $50 x 100 x 0.60 = $3,000 and loan balances is 100P. 2. Price = 100P - $3,000/100P = 0.40 0 / 15 pts Unanswered Question 8 You purchased 500 shares of the New Fund at a price of $25 per share at the beginning of the year. You paid a front-end load of 4%. The securities in which the fund invests increase in value by 13% during the year. The fund's expenses ratio is 1.3%. at end load (c) terminal value, and (d) rate of return if you sell youranswered Question 8 0 / 15 pts You purchased 500 shares of the New Fund at a price of $25 per share at the beginning of the year. You paid a front-end load of 4%. The securities in which the fund invests increase in value by 13% during the year. The fund's expenses ratio is 1.3%. Calculate (a) initial investment, (b) dollar amount of the front-end load, (c) terminal value, and (d) rate of return if you sell your shares at the end of the year. (a) ( b ) (C ) Your Answer: Question 9 2 / 15 pts Stocks A and B have the following probability distributions of expected future returns. Expected return and variance of each stock have been calculated. Probability Stock A Stock B 0.4 - 0.1 0. 1 Expected Return Variance 0.2 0.2 0. 1 Stock A 0.08 0.216 0.4 0.2 O Stock B 0.06 0.0024 1) (3 points) Calculate the covariance between returns on two stocks. 2) (6 points) What percentage of your investment would you have to put into stocks A and B to minimize the portfolio risk? 3) (6 points) Calculate the standard deviation of the minimum risk portfolio.Question 9 2 / 15 pts Stocks A and B have the following probability distributions of expected future returns. Expected return and variance of each stock have been calculated. Probability Stock A Stock B 0.4 - 0.1 0.1 Expected Return Variance 0.2 0.2 0. 1 Stock A 0.08 0.216 0.4 0.2 0 Stock B 0.06 0.0024 1) (3 points) Calculate the covariance between returns on two stocks. 2) (6 points) What percentage of your investment would you have to put into stocks A and B to minimize the portfolio risk? 3) (6 points) Calculate the standard deviation of the minimum risk portfolio. Your Answer: 1. Covariance: COV(RA, RB) - P1x(RA1 - ESA) x (RB1 - ESB) + P2(RA2 - ESA) x (RB2-ESB) + P3(RA3 - ESA) = 0.4x(-0.1-0.08) x (0.1 - 0.06) + 0.2 x( 0.2 - 0.08) x (0.1 - 0.06) + 0.4 x (0.2 - 0.08) x (0-0.06) = - 0.0022 2. 0.08 3. Standard deviation: Stock A: 0.4647 Stock B: 0.04898