Question

1. What bonds makes no interest payments?

2. On March 5, 2013, the Dow Jones Industrial Average set a new high. The index closed at 24,634.53, which was up 164.00 that day.

What was the return (in percent) of the stock market that day?

3. Your discount brokerage firm charges $8.45 per stock trade. How much money do you need to buy 270 shares of Pfizer, Inc. (PFE), which trades at $34.92

Answer 1

1. Zero-coupon bonds make no interest payments and so they are sold at heavy discount to their face value.

Answer -> Zero coupon bonds

2. Closing index value = 24634.53

Increse in Index value = 164

Therefore, Beginning Index value = 24634.53 - 164 = 24470.53

Percentage return on stock = 164/24470.53 = 0.670194%

Answer -> 0.670194%

3. Brokerage charge per stock trade = $8.45

In one stock trade we buy 270 shares of Pfizer Inc. at $34.92

Total money needed = 270*$34.92 + $8.45 = $9436.85

Answer -> 9436.85