Finance/Economics – Money and Financial Institutions

Problem 3-1

Assume the following stock quote for DRK Enterprises, Inc., at your favorite Web site. You also found that the stock paid an annual dividend of $0.65, which resulted in a dividend yield of 1.20 percent.

DAILY YTD 52 WEEK

Company Symbol Vol Close Chg %Chg %Chg High Low %Chg

DRK Enterprises DRK 18,649,130 ?? 0.26 0.48% 8.73% 78.19 51.74 27.4%

1, What was the closing price for this stock yesterday? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

Closing price $ ?

2, How many round lots of stock were traded yesterday? (Round your answer to the nearest whole number.)

Traded stock ?

Problem 3-3

Assume a stock selling for $50.12 has a dividend yield of 1.20 percent. What was the last quarterly dividend paid? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

Quarterly dividend $ ? /share

Problem 3-4

Assume a stock selling for $36.78 has a dividend yield of 2.8 percent and PE ratio of 19.4, what is the earnings per share (EPS) for the company? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

Earnings per share $ ?

Problem 3-5

You purchase 2,500 bonds with a par value of $1,000 for $985 each. The bonds have a coupon rate of 7.7 percent paid semiannually, and mature in 10 years. How much will you receive on the next coupon date? How much will you receive when the bonds mature? (Omit the “$” sign in your response.)

Next payment $ ?

Payment at maturity $ ?

Problem 3-6

The contract size for platinum futures is 50 troy ounces. Suppose you need 1,700 troy ounces of platinum and the current futures price is $1,330 per ounce. How many contracts do you need to purchase? How much will you pay for your platinum? What is your dollar profit if platinum sells for $1,365 a troy ounce when the futures contract expires? What if the price is $1,275 at expiration? (Negative amounts should be indicated by a minus sign. Omit the “$” sign in your response.)

Contracts to purchase ?

Purchase price $ ?

Dollar profit at $1,365 $ ?

Dollar profit at $1,275 $ ?

Problem 3-7

You purchase 11 call option contracts with a strike price of $55 and a premium of $4.50. Assume the stock price at expiration is $67.89.

1. What is your dollar profit? (Omit the “$” sign in your response.)

Dollar profit $ ?

2.

What if the stock price is $53.84? (Negative amounts should be indicated by a minus sign. Omit the “$” sign in your response.)

If the stock price is $53.84, the call is , so the dollar return is $ ?.

Problem 3-11

Use the following corn futures quotes:

Corn 5,000 bushels

Open High Low Settle Chg Open Int

Mar 455’1 457’0 451’6 452’0 -2’6 597,913

May 467’0 468’0 463’0 463’2 -2’6 137,547

July 477’0 477’0 472’4 473’0 -2’0 153,164

Sep 475’0 475’0 471’6 472’2 -2’0 29,258

1. How many of the May contracts are currently open?

Contracts ?

2. How many of these contracts should you sell if you wish to deliver 110,000 bushels of corn in May?

Contracts ?

3.

If you actually make delivery, how much will you receive? Assume you locked in the settle price. (Round your answer to 1 decimal place. Omit the “$” sign in your response.)

Price $ ?

Problem 3-13

Use the following corn futures quotes:

Corn 5,000 bushels

Open High Low Settle Chg Open Int

Mar 455’1 457’0 451’6 452’0 -2’6 597,913

May 467’0 468’0 463’0 463’2 -2’6 137,547

July 477’0 477’0 472’4 473’0 -2’0 153,164

Sep 475’0 475’0 471’6 472’2 -2’0 29,258

Suppose you buy 33 of the September corn futures contracts at the last price of the day. One month from now, the futures price of this contract is 465.125, and you close out your position. Calculate your dollar profit on this investment. (Negative amounts should be indicated by a minus sign. Round your answer to 2 decimal places. Omit the “$” sign in your response.)

Dollar profit $ ?

Problem 3-14

Use the following quotes for JC Penney stock options:

Picture (Check instruction)

If you wanted to purchase the right to sell 6,000 shares of JC Penney stock in May 2010 at a strike price of $30 per share, how much would this cost you? (Omit the “$” sign in your response.)

Price $ ?

Problem 3-20

Suppose you have $55,000 to invest. You’re considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $110 per share. You notice that a put option with a $110 strike is also available with a premium of $5.5. Calculate your percentage return on the put option for the six-month holding period if the stock price declines to $102 per share. (Round your answer to 2 decimal places. Leave no cells blank – be certain to enter “0” wherever required. Omit the “%” sign in your response.)

Percentage return % ?