Explain each of the major financing mechanisms found in financial systems. (typed)

25. What type of order initiates a short position?

1. BTO
2. STO
3. BTC
4. STC

26. What type of order closes out an existing short position?

1. BTO
2. STO
3. BTC
4. STC

27.   What is the type of order where a pair of orders is entered and one is canceled when the other is filled?

1. OCO
2. IOC
3. AON
4. FOK

28. An order that is automatically canceled at the close of the trading day is a ______ order.

1. GTC
2. stop loss
3. stop limit
4. day

29. An order that is automatically renewed every trading day until it has been canceled is a ____ order.

1. GTC
2. stop loss
3. stop limit
4. day

30.   An IOC order is a ______________________?

1. limit order that needs to be filled immediately in its entirety
2. limit order that needs to be filled immediately for any portion
3. limit order that needs to be filled entirely at the soonest possible time
4. none of the above

31. An AON order is a _______________________?

1. limit order that needs to be filled immediately in its entirety
2. limit order that needs to be filled immediately for any portion
3. limit order that needs to be filled entirely at the soonest possible time
4. none of the above

32. A FOK order is a _________________________?

1. limit order that need to be filled immediately in its entirety
2. limit order that needs to be filled immediately for any portion
3. limit order that needs to be filled entirely at the soonest possible time
4. none of the above

33. A stop loss order is ________________.

1. placed above the market for a buy order
2. placed below the market for a sell order
3. becomes a market order when a specific price is traded at or through
4. all of the above

34. A stop limit order is ____________________.

1. placed above the market for a buy order
2. placed below the market for a sell order
3. becomes a limit order when a specific price is traded at or through
4. all of the above

35. Edward O. Thorp’s book developed a crude pricing methodology for __________.

1. writs
2. warrants
3. subpoenas
4. stays

36.   The first options pricing model was developed by ______________.

1. Merton & Scholes
2. Black & Scholes
3. Thorp & Black
4. Gilbert & Sullivan

37. The 1973 Nobel Prize was awarded to ________________.

1. Merton & Scholes
2. Black & Scholes
3. Thorp & Black
4. Gilbert & Sullivan

38. The first exchange to list options was the _______________.

1. NYSE
2. CME
3. AMEX
4. CBOE

39. One call option on equities represents _______________.

1. 1 share of long stock
2. 100 shares of long stock
3. 1 share of short stock
4. 100 shares of short stock

40. One put option on an ETF represents

1. 1 share of long etf
2. 100 shares of long etf
3. 1 share of short etf
4. 100 shares of short etf

41. One call option on futures represents

1. 1 long futures contract
2. 100 long futures contracts
3. 1 short futures contract
4. 100 short futures contracts

42. One put option on futures represents

1. 1 long futures contract
2. 100 long futures contracts
3. 1 short futures contract
4. 100 short futures contracts

43. When a trader buys 1,000 shares of stock and then sells 1,500 shares of the same stock they are

1. flat
2. net long 1,000 shares
3. net short 1,500 shares
4. net short 500 shares

44. When a trader shorts 2,000 shares of stock and then buys 3,000 shares of the same stock they are

1. flat
2. net long 1,000 shares
3. net short 1,500 shares
4. net short 500 shares

45. Options that can only be exercised at expiration are

1. Peruvian style options
2. British style options
3. European style options
4. American style options

46. Options that can be exercised at any time are

1. Peruvian style options
2. British style options
3. European style options
4. American style options

47. One advantage of American style options is

1. hearing the news first
2. that they don’t use the metric system
3. dividend plays
4. better stocks to trade on

48. A trader buys 2,000 shares of stock and then sells 2,000 shares of the same stock they are

1. flat
2. net long 2,000 shares
3. net short 2,000 shares
4. none of the above

49. An SOS order is a

1. discretionary order
2. contingency order
3. ballistic order
4. controversial order

25. The price at which the holder of an option can buy (call) or sell (put) the UV

1. bargain price
2. discount price
3. strike price
4. special price

26.   Assignment of a short put results in a

1. long position in UV
2. short position in UV
3. prone position in trading account
4. loss of capital

27.   Exercising a call results in a

1. renouncing rights to long position in UV
2. renouncing rights to short position in UV
3. short position in UV at strike price
4. long position in UV at strike price

28. At the expiration date an options contract

1. ceases to exist
2. rolls over to the next expiration cycle
3. is rerouted to the next year
4. none of the above

29. Options contracts on the same class, strike price & expiration date

1. series
2. playoffs
3. playdowns
4. divisions

30. Option contract that gives the holder the right to short UV at a specific price within a specified period of time is a

1. call
2. put
3. mall
4. gut

31. Option contract that gives the holder the right to purchase UV at a specific price within a specified period of time

1. call
2. put
3. mall
4. gut

32. An order to immediately buy or sell security at best possible price

1. limit
2. market
3. contingency
4. roll back

33. An order to immediately buy or sell security at a specific price

1. limit
2. market
3. contingency
4. roll back

34. Market order that allows broker to use discretion as to price and time of execution

1. market on close (MOC)
2. market at noon (MAN)
3. market not held (MNH)
4. none of the above

35. What is the maximum possible price willing to be paid?

1. bid
2. ask
3. offer
4. both b and c

36. What is the minimum possible price willing to be sold?

1. bid
2. ask
3. offer
4. both b and c

37. What is the total number of shares traded in one day?

1. accumulation
2. acceleration
3. volume
4. open interest

38. What is the total number of open orders not yet liquidated?

1. accumulation
2. acceleration
3. volume
4. open interest

39. What is the highest possible price willing to be paid in conjunction with the lowest possible price willing to be sold?

1. price auction
2. bid/ask spread
3. ask/bid spread
4. lottery

40. An illiquid UV will have ___________?

1. low open interest
2. low volume
3. high volume
4. both a & b

41. A liquid UV will have ______________?

1. high volume
2. high open interest
3. narrow bid/ask spread
4. all of the above

42. What type of order initiates a long position?

1. Buy to Open (BTO)
2. Sell to Open (STO)
3. Buy to Close (BTC)
4. Sell to Close (STC)

43. What type of order closes out an existing long position?

1. BTO
2. STO
3. BTC
4. STC

leverage relates to the amount of fixed costs the company has; when might the company be better off with high fixed costs? When would they be better of with variable costs?

Brian Cliff is evaluating two mutually exclusive projects
                   (expected cash flows shown below). The firm's cost of capital is 12.25 percent.                              
                                                Year                Project A             Project B
                                                   0                       (600)                                      (600)
                                                   1                           200                                        400
                                                   2                           310                                        260  
                                                   3                           400                                        100
                                                                NPV?                     _____                                   _____

                                                                IRR?                       _____                                   _____

                Calculate the NPVs and IRRs for Projects A and B.

Project A's NPV is $107.02, and Project B's NPV is $33.40.

Project A's NPV is greater than Project B's NPV by 76.04.

Project A's NPV is greater than Project B's NPV by 72.43.

Project A's IRR is 21.27 percent, and Project B's IRR is 18.70 percent.

The following table lists balance of payment current accounts for Country A. Current Accounts 1. Exports of goods, services, and income $172,578 2. Goods, adjusted, excluding military $96,743 3. Services 48,889 4. Income receipts on U.S. assets abroad 33,921 5. Imports of goods, services, and income −152,536 6. Goods, adjusted, excluding military −85,707 7. Services −33,289 8. Income payments on foreign assets in the United States −36,740 9. Unilateral transfers, net −9,581

a.	What is Country A’s total current accounts?

Total current accounts

$

b.	What is Country A’s balance on goods?

Balance on goods

$

c.	What is Country A’s balance on services?

Balance on services

$

d.	What is Country A’s balance on investment income? (Negative amount should be indicated by a minus sign.)

Balance on investment income

$

Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Upton's balance sheet as of December 31, 2018, is shown here (millions of dollars):

Cash	$   3.5		Accounts payable	$   9.0
Receivables	26.0		Notes payable	18.0
Inventories	58.0		Line of credit	0
Total current assets	$ 87.5		Accruals	8.5
Net fixed assets	35.0		Total current liabilities	$ 35.5
			Mortgage loan	6.0
			Common stock	15.0
			Retained earnings	66.0
Total assets	$122.5		Total liabilities and equity	$122.5

Sales for 2018 were $275 million and net income for the year was $8.25 million, so the firm's profit margin was 3.0%. Upton paid dividends of $3.3 million to common stockholders, so its payout ratio was 40%. Its tax rate was 40%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2019. Do not round intermediate calculations.

1. If sales are projected to increase by $80 million, or 29.090909%, during 2019, use the AFN equation to determine Upton's projected external capital requirements. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places.
   $   million
   
2. Using the AFN equation, determine Upton's self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? Round your answer to two decimal places.
   %
   
3. Use the forecasted financial statement method to forecast Upton's balance sheet for December 31, 2019. Assume that all additional external capital is raised as a line of credit at the end of the year and is reflected (because the debt is added at the end of the year, there will be no additional interest expense due to the new debt).
   Assume Upton's profit margin and dividend payout ratio will be the same in 2019 as they were in 2018. What is the amount of the line of credit reported on the 2019 forecasted balance sheets? (Hint: You don't need to forecast the income statements because the line of credit is taken out on last day of the year and you are given the projected sales, profit margin, and dividend payout ratio; these figures allow you to calculate the 2019 addition to retained earnings for the balance sheet without actually constructing a full income statement.) Round your answers to two decimal places.

   Upton Computers Pro Forma Balance Sheet December 31, 2019 (Millions of Dollars)
   Cash	$
   Receivables	$
   Inventories	$
   Total current assets	$
   Net fixed assets	$
   Total assets	$
   Accounts payable	$
   Notes payable	$
   Line of credit	$
   Accruals	$
   Total current liabilities	$
   Mortgage loan	$
   Common stock	$
   Retained earnings	$
   Total liabilities and equity	$

Construct a portfolio from the following assets:
- SPY (SPDR S&P 500 ETF Trust)
- BND (Vanguard Total Bond Market ETF)
- IYR (iShares US Real Estate ETF)
- SHV (iShares Short Treasury Bond ETF)
- DBC (Invesco DB Commodity Tracking)

With an investment period of 01/01/2014 to 01/01/2019, the goal is to achieve a target return of 4% with minimum volatility. Estimate expected returns and volatility from the 5-year time series. Assume a portfolio of $100 million, allocating no less than $10 million and no more than $50 million to each asset. You should compute the five weights for the five asset classes, as well as the expected return and volatility of the portfolio (annualized).

Exercise 21-2 Preparing flexible budgets LO P1

Tempo Company's fixed budget (based on sales of 14,000 units) for the first quarter of calendar year 2017 reveals the following.

	Fixed Budget
Sales (14,000 units)						$	2,856,000
Cost of goods sold
Direct materials		$	350,000
Direct labor			616,000
Production supplies			364,000
Plant manager salary			150,000				1,480,000
Gross profit							1,376,000
Selling expenses
Sales commissions			112,000
Packaging			210,000
Advertising			100,000				422,000
Administrative expenses
Administrative salaries			200,000
Depreciation—office equip.			170,000
Insurance			140,000
Office rent			150,000				660,000
Income from operations						$	294,000

Complete the following flexible budgets for sales volumes of 12,000, 14,000, and 16,000 units. (Round cost per unit to 2 decimal places.)

Tempo Company

Flexible Budgets

For Quarter Ended March 31, 2017

-----FlexIble Budget----- -------Flexible Budget at------

Variable Amount per Unit Total Fixe Cost 12,000 units 14,000 units 16,000 units

1)

2) Variable Costs:

3)

4)

5)

7)

8)

9)

10)

11) Fixed Costs

12)

13)

14)

15)

16)

17)

18)

19)

20)

2. You estimate that by the time you retire in 35 years, you will have accumulated savings of $3.8 million.

a. If the interest rate is 10.0% and you live 15 years after retirement, what annual level of expenditure will those savings support?

b. Unfortunately, inflation will eat into the value of your retirement income. Assume a 4% inflation rate and work out a spending program for your $3.8 million in retirement savings that will allow you to increase your expenditure in line with inflation. What will be your expenditure amount in real terms for each year of your retirement?

Describe and discuss the importance of profitability, solvency and liquidity for the financial analysis of a business.

Provide measurements indicators for profitability, solvency and liquidity as important financial analysis a business focused on.

On June 22, Ali joined a gulf club. His bank will automatically deduct BD 150 from his checking
account at the end of each month, and deposit it into his gulf club account, where it will earn
3% annual interest. The account comes to term on October 18. Find the following:
a. Find the future value of Ali’s gulf club account. ( 3 Marks )
b. Find Ali’s total contribution to the account. (1 Mark)
c. Find the total interest earned on the account. (1 Mark)
3. How long will it take BD 7000 to accumulate to BD 18,000 if the interest is at 5% compounded
semi- annually?

Show all calculation please.

4) Crackle and Pop Telephone Company is considering an upgrade to their current call-waiting equipment. Their existing hardware was purchased 3 years ago for $150,000, has been depreciated straight line over a 5-year useful life (so, two years of depreciable life are remaining), and has an estimated current market value of $70,000. Bob Crackle (owner of the firm) estimates that the current equipment could probably last 5 more years (from today) at which time its market value will equal $0. A replacement piece of equipment costs $300,000, and can be depreciated straight line over 3 years. This new equipment will last 5 years, at which time its market (scrap) value will equal $10,000. Due to enhanced features, acquiring this new equipment would lead to a $10,000 revenue increase in the first year (t=1). These revenues would grow by $4,000 per year for the subsequent four years (t = 2, 3, 4, 5). (So, revenues will be $10,000, $14,000, 18,000….. higher.) In addition, due to its higher quality construction, it would lead to a decrease in operating expenses of $7,000 per year at times t =1,2,3,4, and 5. (So, expenses are lower by $7,000, $7,000, $7,000….) Due to the increase in revenues, accounts receivable will likely rise. Mr. Crackle estimate that AR will go from the exiting level of $12,000 to $18,000 at time 1, $20,000 at times 2, 3, and 4, and back to $12,000 at time 5. If the required return for this type of project is 12% and the tax rate is 40%, should the replacement piece of equipment be acquired? Be sure to provide quantitative justification for your answe

On June 22, Ali joined a gulf club. His bank will automatically deduct BD 150 from his checking
account at the end of each month, and deposit it into his gulf club account, where it will earn
3% annual interest. The account comes to term on October 18. Find the following:
a. Find the future value of Ali’s gulf club account. ( 3 Marks )
b. Find Ali’s total contribution to the account. (1 Mark)
c. Find the total interest earned on the account. (1 Mark)
3. How long will it take BD 7000 to accumulate to BD 18,000 if the interest is at 5% compounded
semi- annually?