Question

21. You purchased 100 shares of IBM common stock on margin at $153 per share. Assume the margin is 50%, and the maintenance margin is 30%. Below what stock price level would you a margin call? A $102.00 B. $109.29 C. $127.50 D. $153.00 E. None of the above 22. Which of the following is NOT a component of an Investment Policy Statement to nent of an Investment Policy Statement for individual investors? A. The purpose of the portfolio B. Tax status and relevant legislation C. Time horizon D. The policy asset allocation E. Fees 23. Individuals must pay income tax on all income earned from their investment in: A. TSFA accounts B. RRSP accounts C. Canadian mutual funds D. All of the above are taxable E. None of the above is taxable 24. means that investors are too slow in updating their beliefs in response to evidence. A. Framing B. Regret avoidance c. Overconfidence D. Conservatism bias E. None of the options is correct.

Need help on these 4 multiple choice questions please!

Answer 1

21. Solution is B =$109.29

IBM Common stock=100 shares

Margin= $153 per share

Initial Margin is 50%

Maintenance margin is 30%

Now, Loan amount = Common stock* Margin* Initial Margin

   =100 * $153 * 0.50

=$7,650

To find the price P, we will use the following formula,

Maintenance Margin= (Common stock*Price - Loan amount)/ (100 * Price)

0.30 = (100P - 7650) / 100 P

30P = 100 P - 7650

70P = 7650

P = $109.29

22. E. Fees is not a component of an investment policy statement for individual statements.

Components are defining a policy portfolio, asset allocation plan, time horizon for achievement of performance objectives, accounting of tax situation and tax issues.

23. E. None of the above are taxable.

RRSP is a registered retirement savings plan and tax on such account contributions is deferred until retirement

TFSA is a tax free savings account, in this the tax is exempted on any earned income from the investment

24. D. Conservatism bias means that investors are too slow in updating their beliefs in response to evidence.