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1. Suppose the price of XYZ increases to $110 from $97.5, while ABC falls to $20 from $23.75. Find the percentage change in the price-weighted average of these two stocks. Compare that to the percentage return of a portfolio holding one share in each company. 2. Both a call and a put currently are traded on stock XYZ; both have strike prices of $55 and expirations of 6 months. What will be the profit to an investor who buys the call for $2.5 in the following scenarios for stock prices in 6 months? What will be the profit in each scenario to an investor who buys the put for $4.5 ? a. $50 b. $53 c. $55 d. $58 e. $60 3. Suppose that you sell short 1,250 shares of ABG Capital, currently selling for $35.65 per share, and give your broker 65% to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if ABG stock is selling at: (i) $43; (ii) $40; (iii) $31 ? Assume that ABG pays 1% dividends. b. If the maintenance margin is 45%, how high can ABG's price rise before you get a margin call? 4. XYZ LLC is selling currently at 35.75 where before 1 years the company share price was 32.75 . The purchase was done using $13000 of own equity and rest by loan. The interest rate on loan is 11.5%. The consideration is based on 1650 shares. a) Suggest the percentage increase after 1 years b) Suggest if any margin call accrues if the price falls below $10.5. c) If the equity size changed to $8000 what would be the margin call price. d) In case of shorting if the price rises t0 $52 what would be the margin call and debt account condition

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