Chapter 11: Questions 1 and 12

Web Exercise 1

Chapter 12: Quantitative problem 6

Chapter 13: Quantitative problems 5

Web Exercise 2

Chapter 11: Questions 1 and 12

#1 what characteristics define the money markets?
Liquidity - Since they are fixed-income securities with short-term maturities of a
year or less, money market instruments are extremely liquid.
Safety - They also provide a relatively high degree of safety because their issuers
have the highest credit ratings.
Discount Pricing- Money markets are issued at a discount to their face value.
#2 who issues federal funds, and what is the usual purpose of these
funds?
The federal bank is responsible for issuing federal funds, therefore providing banks
with an infusion of reserve in case of a fund shortage.
Web Exercise 1
Locate the current rate of the following securities:
Securities
Prime rate
Federal funds
Commercial paper (finance)
Certificates of deposits
Discount rate
One-month Eurodollar deposits

Rate (march 2015)

3.25
0.11
.09
0.02
0.75
0.19

Chapter 12: Quantitative problem 6

The yield on a corporate bond is 10%, and it is currently selling at par. The
marginal tax rate is 20%. A par value municipal bond with a coupon rate of
8.50% is available, which security is a better buy?
After tax = 0.1 X (0.8) = 8%
With municipal bond sitting at 8.5% its better than the corporate bond.
Chapter 13: Quantitative problems 5
Suppose Microsoft, Inc. was trading at $27.29 per share. At that time, It pays an
annual dividend of $0.32 per share, and analysts have set a 1-year target price
around $33.30 per share.
What is the expected return on this stock?
E/R = 33.3 + 0.32 27.29 = 6.33 / 27.29
= 0.23195 (23.2%)

Web Exercise 2
Which index has the most volatile over the last five years?
Nikkei 225 seems to have the most volatility of all the charts in the last five
years
Which Index has posted the largest gains over the last five yrs.
Dow Jones Industrial Average appears to have the largest gain with a peak of
19000
Which Index performed the best today?
S&P 500 Index had the best performance today with a peak of 19,894.35