投资学第10版课后习题答案Chap002.docx

投资学第10版课后习题答案Chap002.docx

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投资学第10版课后习题答案Chap002

CHAPTER2:

ASSETCLASSESANDFINANCIAL

INSTRUMENTS

PROBLEMSETS

1.Preferredstockislikelong-termdebtinthatittypicallypromisesafixedpaymenteachyear.Inthisway,itisaperpetuity.Preferredstockisalsolikelong-termdebtinthatitdoesnotgivetheholdervotingrightsinthefirm.

Preferredstockislikeequityinthatthefirmisundernocontractualobligationtomakethepreferredstockdividendpayments.Failuretomakepaymentsdoesnotsetoffcorporatebankruptcy.Withrespecttothepriorityofclaimstotheassetsofthefirmintheeventofcorporatebankruptcy,preferredstockhasahigherprioritythancommonequitybutalowerprioritythanbonds.

2.Moneymarketsecuritiesarecalledcashequivalentsbecauseoftheirhighlevelofliquidity.Thepricesofmoneymarketsecuritiesareverystable,andtheycanbeconvertedtocash.,sold）onveryshortnoticeandwithverylowtransactioncosts.ExamplesofmoneymarketsecuritiesincludeTreasurybills,commercialpaper,andbanker'sacceptances,eachofwhichishighlymarketableandtradedinthesecondarymarket.

3.（a）Arepurchaseagreementisanagreementwherebythesellerofasecurityagreesto“repurchase”itfromthebuyeronanagreedupondateatanagreeduponprice.Reposaretypicallyusedbysecuritiesdealersasameansforobtainingfundstopurchasesecurities.

4.Spreadsbetweenriskycommercialpaperandrisk-freegovernmentsecuritieswillwiden.Deteriorationoftheeconomyincreasesthelikelihoodofdefaultoncommercialpaper,makingthemmorerisky.Investorswilldemandagreaterpremiumonallriskydebtsecurities,notjustcommercialpaper.

5.

Corp.Bonds

PreferredStock

CommonStock

Votingrights（typically）

Yes

contractualobligation

Yes

Perpetualpayments

Yes

Yes

Accumulateddividends

Yes

Fixedpayments（typically）

Yes

Yes

Paymentpreference

First

Second

Third

6.Municipalbondinterestistax-exemptatthefederallevelandpossiblyatthestatelevelaswell.Whenfacinghighermarginaltaxrates,ahigh-incomeinvestorwouldbemoreinclinedtoinvestintax-exemptsecurities.

7.a.Youwouldhavetopaytheaskpriceof:

%ofparvalueof$1,000=$

b.Thecouponrateis%implyingcouponpaymentsof$annuallyor,moreprecisely,$semiannually.

c.TheyieldtomaturityonafixedincomesecurityisalsoknownasitsrequiredreturnandisreportedbyTheWallStreetJournalandothersinthefinancialpressastheaskyield.Inthiscase,theyieldtomaturityis%.Aninvestorbuyingthissecuritytodayandholdingituntilitmatureswillearnanannualreturnof%.Studentswilllearninalaterchapterhowtocomputeboththepriceandtheyieldtomaturitywithafinancialcalculator.

8.Treasurybillsarediscountsecuritiesthatmaturefor$10,000.Therefore,aspecificT-billpriceissimplythematurityvaluedividedbyoneplusthesemi-annualreturn:

P=$10,000/=$9,

9.Thetotalbefore-taxincomeis$4.Afterthe70%exclusionforpreferredstockdividends,thetaxableincomeis:

$4=$

Therefore,taxesare:

$=$

After-taxincomeis:

$–$=$

Rateofreturnis:

$$=%

10.a.Youcouldbuy:

$5,000/$=shares.Sinceitisnotpossibletotradeinfractionsofshares,youcouldbuy77sharesofGD.

b.Yourannualdividendincomewouldbe:

77$=$

c.Theprice-to-earningsratioisandthepriceis$.Therefore:

$Earningspershare=Earningspershare=$

d.GeneralDynamicsclosedtodayat$,whichwas$higherthanyesterday’spriceof$

11.a.Att=0,thevalueoftheindexis:

（90+50+100）/3=80

Att=1,thevalueoftheindexis:

（95+45+110）/3=

Therateofreturnis:

80）1=%

b.Intheabsenceofasplit,StockCwouldsellfor110,sothevalueoftheindexwouldbe:

250/3=withadivisorof3.

Afterthesplit,stockCsellsfor55.Therefore,weneedtofindthedivisor（d）suchthat:

=（95+45+55）/dd=.Thedivisorfell,whichisalwaysthecaseafteroneofthefirmsinanindexsplitsitsshares.

c.Thereturniszero.Theindexremainsunchangedbecausethereturnforeachstockseparatelyequalszero.

12.a.Totalmarketvalueatt=0is:

（$9,000+$10,000+$20,000）=$39,000

Totalmarketvalueatt=1is:

（$9,500+$9,000+$22,000）=$40,500

Rateofreturn=（$40,500/$39,000）–1=%

b.Thereturnoneachstockisasfollows:

rA=（95/90）–1=

rB=（45/50）–1=–

rC=（110/100）–1=

Theequallyweightedaverageis:

[++]/3==%

13.Theafter-taxyieldonthecorporatebondsis:

（1–==%

Therefore,municipalsmustofferayieldtomaturityofatleast%.

14.Equationshowsthattheequivalenttaxableyieldis:

r=rm/（1–t）,sosimplysubstituteeachtaxrateinthedenominatortoobtainthefollowing:

a.%

b.%

c.%

d.%

15.Inanequallyweightedindexfund,eachstockisgivenequalweightregardlessofitsmarketcapitalization.Smallercapstockswillhavethesameweightaslargercapstocks.Thechallengesareasfollows:

Givenequalweightsplacedtosmallercapandlargercap,equal-weightedindices（EWI）willtendtobemorevolatilethantheirmarket-capitalizationcounterparts;

ItfollowsthatEWIsarenotgoodreflectorsofthebroadmarketthattheyrepresent;EWIsunderplaytheeconomicimportanceoflargercompanies.

Turnoverrateswilltendtobehigher,asanEWImustberebalancedbacktoitsoriginaltarget.Bydesign,manyofthetransactionswouldbeamongthesmaller,less-liquidstocks.

16.a.Theten-yearTreasurybondwiththehighercouponratewillsellforahigherpricebecauseitsbondholderreceiveshigherinterestpayments.

b.Thecalloptionwiththelowerexercisepricehasmorevaluethanonewithahigherexerciseprice.

c.Theputoptionwrittenonthelowerpricedstockhasmorevaluethanonewrittenonahigherpricedstock.

17.a.Youboughtthecontractwhenthefuturespricewas$（seeFigure

andrememberthatthenumbertotherightoftheapostropherepresentsaneighthofacent）.Thecontractclosesatapriceof$,whichis$morethantheoriginalfuturesprice.Thecontractmultiplieris5000.Therefore,thegainwillbe:

$5000=$

b.Openinterestis135,778contracts.

18.a.Owningthecalloptiongivesyoutheright,butnottheobligation,tobuyat$180,whilethestockistradinginthesecondarymarketat$193.Sincethestockpriceexceedstheexerciseprice,youexercisethecall.

Thepayoffontheoptionwillbe:

$193-$180=$13

Thecostwasoriginally$,sotheprofitis:

$13-$=$

b.Sincethestockpriceisgreaterthantheexerciseprice,youwillexercisethecall.Thepayoffontheoptionwillbe:

$193-$185=$8

Theoptionoriginallycost$,sotheprofitis$8-$=-$

c.Owningtheputoptiongivesyoutheright,butnottheobligation,tosellat$185,butyoucouldsellinthesecondarymarketfor$193,sothereisnovalueinexercisingtheoption.Sincethestockpriceisgreaterthantheexerciseprice,youwillnotexercisetheput.Thelossontheputwillbetheinitialcostof$.

19.Thereisalwaysapossibilitythattheoptionwillbein-the-moneyatsometimepriortoexpiration.Investorswillpaysomethingforthispossibilityofapositivepayoff.

20.

ValueofCallatExpiration

InitialCost

Profit

a.

0

4

-4

b.

0

4

-4

c.

0

4

-4

d.

5

4

1

e.

10

4

6

ValueofPutatExpiration

InitialCost

Profit

a.

10

6

4

b.

5

6

-1

c.

0

6

-6

d.

0

6

-6

e.

0

6

-6

21.Aputoptionconveystherighttoselltheunderlyingassetattheexerciseprice.Ashortpositioninafuturescontractcarriesanobligationtoselltheunderlyingassetatthefuturesprice.Bothpositions,however,benefitifthepriceoftheunderlyingassetfalls.

22.Acalloptionconveystherighttobuytheunderlyingassetattheexerciseprice.Alongpositioninafuturescontractcarriesanobligationtobuytheunderlyingassetatthefuturesprice.Bothpositions,however,benefitifthepriceoftheunderlyingassetrises.

CFAPROBLEMS

1.（d）Therearetaxadvantagesforcorporationsthatownpreferredshares.

2.Theequivalenttaxableyieldis:

%/（1=%

3.（a）Writingacallentailsunlimitedpotentiallossesasthestockpricerises.

4.a.Thetaxablebond.Withazerotaxbracket,theafter-taxyieldforthe

taxablebondisthesameasthebefore-taxyield（5%）,whichisgreaterthantheyieldonthemunicipalbond.

b.Thetaxablebond.Theafter-taxyieldforthetaxablebondis:

1.05（1–=%

c.Youareindifferent.Theafter-taxyieldforthetaxablebondis:

（1–=%

Theafter-taxyieldisthesameasthatofthemunicipalbond.

d.Themunicipalbondoffersthehigherafter-taxyieldforinvestorsintaxbracketsabove20%.

5.Iftheafter-taxyieldsareequal,then:

=×（1–t）

Thisimpliesthatt==30%.