DII5018 - INTRODUCTION TO INVESTMENT

TUTORIAL 2
SECURITIES MARKETS AND TRANSACTIONS
Multiple Choice Questions
1) The over-the-counter (OTC) market is a
A) centrally located auction market.
B) telecommunications network connecting dealers.
C) market solely for institutional traders.
D) geographically dispersed auction market
2) Which of the following are associated with bear markets?
I. investor pessimism
II. rising profits
III. economic slowdown
IV. rising security prices
A) I and III only
B) II and III only
C) I, II and III only
D) II, III and IV only
3) The effects of fluctuating foreign exchange rates may
I. Increase an investor's rate of return.
II. Decrease an investor's rate of return.
III. Can be avoided by investing in depository receipt.
IV. Can be avoided by investing in mutual funds that specialize in foreign stocks.
A) I and II only
B) I and III only
C) III and IV only
D) I, II,III, and IV
4) Shamim invested $6,000 and purchased shares of a Japan corporation when the
exchange rate was $1.00 = 100 Yen. After six months, she sold all of the shares for
650, 000 Yen, when the exchange rate was $1.00 = 103 Yen. No dividends were paid
during the time she owned the shares of stock. What is the amount of her gain or loss
on this investment?
A) $310 gain
B) $485 gain
C) $310 loss
D) $485 loss
5) Kim purchased 3,000 shares of a Brunei corporation at price 1BND per share,
when the exchange rate was 1 BND = 2.58 MYR. After six months, she sold all of the
shares when the exchange rate was 1 BND = 2.55 MYR. No dividends were paid
during the time Kim owned the shares of stock. What is the amount of Kim's gain or
loss on this investment?

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DII5018 - INTRODUCTION TO INVESTMENT

A) MYR 90 gain
B) MYR 76 gain
C) MYR 90 loss
D) MYR 76 loss

Structure Cases
Sharon want to purchase 4,000 shares of the stock at RM 35 per share at a time when
the initial margin requirement is 65%. Sharon has been following the price movement
of the stock, she believes that it is currently undervalue. The account also stated that
maintenance margin is 50%. If account margin position falls below 50% margin call
will occur and customer will be informed.
Based on the information above, answer the followings:
a) Calculate the value of investment of the stock if Sharon DID NOT use the
margin facility.
Answer:
b) If Sharon decide to use margin facility, calculate the debit balance and the cash
equity needed to purchase the stock.
Answer:
c) Based on question in (b), the stock price raised to RM 53 per share, calculate the
capital gain earned and return on the investors equity.
d) When the price of share increased in (c), what is the current margin percentage?
Answer:
e) Given the maintenance margin above, how far does the stock price have to fall
before Sharon faces margin call?
Answer:

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