Notes:

1. Submit a word/PDF document via Moodle by the due time (mathematics can be typed in word; but if you prefer hand-writing, scanning or photocopying is also acceptable).

2.  There  are  four  question  sets.  The  total  marks  for  the  assignment  is  100.  The assignment accounts for 25% of the total assessment.

3. Plagiarism is a specific form of academic misconduct. If found, both parties will be penalized regardless of who copies from whom.

4. Please include a cover page with your name and student ID. Thank you.

5. Show all your workings in order to get full marks.

1) Suppose that Apple currently is selling at $165 per share. You buy 400 shares using $25,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 5%.

a.   What is the percentage increase in the net worth of your brokerage account if the price of Apple immediately changes to (i) $170; (ii) $180; (iii) $200? What is the relationship between your percentage return and the percentage change in the price of Apple? (10 marks)

b.   If the maintenance margin is 25%, how low can Apple’s price fall before you get a margin call? (10 marks)

c.   How would your answer to (b) change if you had financed the initial purchase with only $20,000 of your own money? (10 marks)

2) Daily values of NZX50 and ASX200 in 2023 are provided in the Excel file. For both indexes, calculate:

a.    Daily average index returns. (5 marks)

b.    Standard deviation of daily index returns. (5 marks)

c.    Compare   the  results   above  and  explain  the  implications  with  FINAN202 knowledge. (5 marks)