Have to show work 12- Claire has 200 shares of stock in a firm that just issued

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Have to show work

12- Claire has 200 shares of stock in a firm that just issued 1 right per share. The right gives the holder the opportunity to purchase 0.125 shares of stock. If Claire exercises all her rights, how many addition shares of stock will she be able to obtain? A: 8 B: 25 C: 125 D: 200 E: 1,600

13- Before the new tax law enacted in 2003, dividends were taxed as ordinary income. Now the maximum tax rate on dividends paid to individuals is 15%. As a result of the law, an investor in the 25% tax bracket who received $70,000 in qualifying dividends had a tax savings of A: $ 0. B: $ 7,000. C: $ 9,000. D: $10,500. E: $17,500.

14- Abby buys a position in a closed-end mutual fund that is selling at an 8% discount. The fund earns 12%, but the discount decreases to 5%. What is Abby’s return on this investment? A: 8.5% B: 12.0% C: 12.4% D: 14.2% E: 15.7%

15- Corey pays 15% in dividend and capital gains taxes and 35% in ordinary income taxes. Four years ago, she invested $500,000 in a private placement offering with some friends. The initial price was $50 a share. The investment group is now discussing the possibility of publicly selling their shares. One of the members of the group believes they could get at least $75 a share. If this is correct, what are Corey’s taxes when she sells her shares (ignoring commissions and fees)? A: $0 because the group is not allowed to sell their private placement shares to the public B: $37,500 C: $54,000 D: $70,000 E: $87,500

16- Assume that the futures price of gold is $390 a troy ounce, and the contract is for 100 troy ounces. The initial margin is $2,000. If the future price increases by 5.0%, what is the return to the investor? A: 1.0% B: 2.5% C: 5.0% D: 19.5% E: 97.5%

17- Iris pays 15% in dividends and capital gains taxes and 35% in ordinary income taxes. Several years ago, she purchased a Mortgage-Backed Security (MBS) for $20,000 which was the par value of the underlying assets. At the end of this year, she received a statement stating she had received $700 in scheduled amortization of principal, $1,200 in interest, and $500 in unscheduled collection of principal. What is Iris’s after-tax cash flow this year from this investment? A: $1,560 B: $1,695 C: $1,980 D: $2,040 E: $2,400

18- Three years ago, Charles purchased a $1,000 face value 10-year Treasury note for par. The market value of this bond is now $950. If Charles sells the bond today, the tax implications of sale are A: $50 loss against ordinary income B: $50 capital gain C: $50 capital loss D: $50 gain against ordinary income E: No tax effects since Treasury securities are exempt from taxes

19- Two years ago, an investor purchased a $1,000 par 6% coupon bond that pays interest semiannually. Inflation over the last two years has been 2% per year. The inflation-adjusted value of the next interest payment is A: $28.84 B: $30.00 C: $31.21 D: $57.67 E: $60.00

20- Cameron pays 15% in dividend and capital gains taxes and 35% in ordinary income taxes. Ten years ago, Cameron purchased a position in a limited partnership for $10,000. Three years later, she was required to contribute $2,000 more to the partnership. Two years ago, she was required to contribute an additional $2,000. If Cameron sells her limited partnership investment today for $20,000, what are the taxes? A: $ 900 B: $1,500 C: $2,100 D: $2,700 E: $3,500

Explanation / Answer

Answer:12 B 25

=200 shares*0.125/1=25

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