by kate ashford, carolyn bigda, george mannes, walter

1G FWM Fall 07 fall 07 chapter 1 amp 2 HANDOUTSwpd 81407 257 pm

RULES TO GROW RICH (Edited)

By Kate Ashford Carolyn Bigda George Mannes Walter Updegrave and Penelope WangMoney Magazine November 2006

Tough financial questions come your way all the time How much do I need to save Should Irefinance my mortgage It sure would be nice to have an easy guide on hand for those moments Nowyou do

PLANNING

1 If yoursquore not saving 10 of your salary you arenrsquot saving enough The earlier you start savingthe less yoursquoll need to set aside every year to meet your goals Thatrsquos because you allow your moneymore time to grow -- the gains on your invested savings will build on the prior yearrsquos gains Thatrsquos thepower of compounding and itrsquos the best way to accumulate wealth Saving at least 10 of yourannual salary for retirement is recommended but the older you start saving the more yoursquoll need tosave If you start at 50 you may need to put away 30 a year and still postpone retirement by a fewyears

2 Keep three monthsrsquo worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies If you have kids or rely on one income make it six monthsrsquo Anemergency fund is a hassle to build but yoursquoll be glad you did next time your transmission sputters oryour boss hands you a pink slip Besides curbing spending where you can and setting aside a smallamount of your pay every two weeks there are several ways to build your cash cushion Some sourcesto draw on (1) A bonus or financial gift from a relative (2) Money you get back from a flexiblespending account a transportation reimbursement account or an insurance claim (3) An extrapaycheck If yoursquore paid every two weeks yoursquoll get 26 paychecks a year So in some months yoursquollget three instead of two If your fixed monthly expenses donrsquot change you might be able to set asideone paycheck a year

3 Aim to accumulate enough money to pay for a third of your kidsrsquo college costs You can borrowthe rest or use some of your income to help out when your child is in college Most parents havetrouble saving enough for their retirement But they still want to help their children pay for college Inthe struggle to feed your 401(k) and your childrsquos 529 the 401(k) should win out Thatrsquos because thereare no scholarships for retirement and your children have a lot of funding options including financialaid loans and a job They also can go to an excellent but less expensive school And when theyrsquore incollege if you have some extra cash after contributing to your retirement accounts you can help thempay some of their expenses with it

4 You need enough life insurance to replace at least five years of your salary ndash as much as 10years if you have several young children or significant debts Life insurance lets surviving familymembers maintain something close to the standard of living they enjoyed prior to you or yourspousersquos death Stay-at-home spouses also should have life insurance since they do all sorts of thingsthat you would need to pay someone else to do in their absence There are two types of policiesCash-value These cover you for your entire life and includes an investment component TermThese cover you for a specific period of time and provide a death benefit only For most people thechoice is a no-brainer - the premiums on a term policy are much lower


5 When you buy insurance choose the highest deductible you can afford Itrsquos the easiest way tolower your premium Itrsquos the open secret of the insurance game File a claim your premiums goup For that reason itrsquos in your interest ndash as much as possible ndash to shoulder small damages out ofpocket For home insurance raising your deductible from $500 to $1000 could save you 25 onpremiums according to the Insurance Information Institute

6 The best way to improve your credit score is to pay bills on time and to borrow no more than30 of your available credit It also helps to pay off debt rather than moving it around becausethe ratio of your credit card balance to your credit limit is key Say you owe a total of $2000 onfour credit cards each of which has a $2000 limit Your total credit limit is $8000 of which yourtotal balance ($2000) accounts for 25 If you transfer all your balances to two cards and cancelthe other two your total credit limit is reduced to $4000 and your $2000 balance now accounts for50 of that limit Also donrsquot open new accounts when applying for a loan if possible

INVESTING

7 All else being equal the best place to invest is a 401(k) Once yoursquove earned the full companymatch max out a Roth IRA Still have money to invest Put more in your 401(k) or a traditionalIRA One of the keys to saving for the long run is keeping as much money as possible shielded fromtaxes A 401(k) gives you that and more You also get an immediate tax break becausecontributions come out of your paycheck before taxes are withheld And therersquos the possibility of amatching contribution from your employer ndash thatrsquos free money The federal limit on annualcontributions has been increasing gradually and is $15000 in 2006 If yoursquore 50 or older you maycontribute an additional $5000 With a Roth IRA you get no immediate tax break but withdrawalsin retirement will be tax-free You can make at least a partial contribution to a Roth if yourmodified adjusted gross income is less than $110000 if yoursquore single or less than $160000 ifyoursquore married and filing jointly

8 To figure out what percentage of your money should be in stocks subtract your age from 120Since 1926 stocks have returned an annual average of 105 percent long-term government bondsreturned 51 percent and cash measured by Treasury bills and other short-term investments hasreturned just 31 percent In other words if yoursquore investing for the long-term stocks are the placeto be But in the short term the stock market can be downright dangerous with much more severedrops than the bond market has Thatrsquos where this rule comes in - the younger you are the moretime you have to recover from stock-market crashes As you get older you should gradually movemoney out of stocks and into bonds

9 Invest no more than 10 of your portfolio in your company stock - or any single companyrsquosstock for that matter In a bear market itrsquos tough to find a safe-haven ndash a lot of the stocks in yourportfolio will be sinking too But donrsquot compound the risk by holding too much in any one stockThe most recent dramatic example of just how serious this specific-stock risk can be is Enronwhich imploded after its executives allegedly engaged in various acts of malfeasance But acompany with perfectly honest management might fall on hard times too And if itrsquos youremployerrsquos stock yoursquore in an even worse position ndash not only will your portfolio be decimated butyour job could be at risk

10 The most you should pay in annual fees for a mutual fund is 1 for a large-company stockfund 13 for any other type of stock fund and 06 for a US bond fund Running a mutualfund isnrsquot free ndash companies have to pay for research managersrsquo salaries and so on Those costs areborne by the investors in the funds and get deducted from returns A percentage point here and theremay not sound like much but a fund manager needs to pick a lot of great stocks to make up forthose costs


11 Aim to build a retirement nest egg that is 25 times the annual investment income you need Soif you want $40000 a year to supplement Social Security and a pension you must save $1 millionThis rule is based on the amount that you can safely withdraw from your nest egg in retirement Thesingle most effective thing you can do to ensure that your money will last is to start out with a lowwithdrawal rate of 4 percent then raise that amount annually to compensate for a cost-of-livingincrease or inflation The reason is that if a bear market hits early in retirement an enormous losscan put such a big dent in the portfolio that it wonrsquot be able to recover in time to benefit when themarket rebounds

12 If you donrsquot understand how an investment works donrsquot buy it There is no shortage ofinvestment products out there In addition to stocks and bonds there are exotic hedge funds andinsurance products Fortunately you donrsquot have to try and make sense out of them In fact you canconstruct a sensible portfolio with just two index mutual funds ndash one stock and one bond To reachyour goals you donrsquot need to shoot for spectacular returns Individual investors can outpace themarket with moderately above-average returns in good times as long as they donrsquot lose too muchmoney in bad times

HOME AND MORTGAGE

13 Itrsquos worth refinancing your mortgage when you can cut your interest rate by at least onepoint There are transaction costs and fees involved in any refinancing that must be either paid outof pocket or added to the mortgage principal Some of those costs can be considerable Titleinsurance can easily run into four figures and broker fees can be expensive as well Like manythings in life timing is everything here Is your job likely to relocate soon Will you need a biggerhouse in the next couple of years Unless yoursquore planning to stay in the home for a while thebenefits of a lower monthly bill may not be worth the additional expenses that refinancing generates

14 Spend no more than 2frac12 times your income on a home For a down payment itrsquos best to come upwith at least 20 Many buyers in recent years have stretched the limits of affordability and havebypassed the traditional 20 down model But make a smaller down payment and most lenders willrequire you to have private mortgage insurance (PMI) which adds a minimum 05 of the loanamount to your mortgage payments about $1000 more a year on a $200000 principal

15 Your total housing payments should not exceed 28 of your gross income Total debt paymentsshould come in under 36 These guidelines include payment on all loans such as school and autoloans and credit card debt Also remember to take into account other home-related expenses to judgea housersquos affordability Property and school taxes home insurance and energy costs andrequirements can vary considerably around the nation Try to estimate future maintenance costs andwork them into your budget Some homes especially older ones may require more regular upkeepthan homes built with more modern materials Roofs siding and heating cooling plumbing andelectric services may have to be replaced within a few years of purchase


KENT FAMILY FINANCES

FACTS

Ken and Kendra Kent have been married twelve years and have twin 4-year-old sons Kendra earns$78000 as a Walmart assistant manager and Ken is a stay-at-home dad They give you theinformation on the next page about their finances

PROBLEMS

1 Using the information in item (1) on ho 5 determine which accounts are assets and liabilitiesand prepare a balance sheet in proper form as of April 30 2007 The solution is on ho 6

2 Prepare an income statement for May considering the following

(a) The payroll deductions are all expenses except the 401(k) contribution The contributionreduces her net pay and cash and increases her 401(k) account balance by $100 One assetis increased and another asset is reduced by the same amount As discussed on casebookpage 5 below the income statement these are balancing entries on the balance sheet neitheris an income nor an expense

(b) All May expenditures are expenses except the principal payments on the loans and the$1000 investment in the mutual fund The loan payments reduce an asset (cash) and liabilities (the loan balances) The mutual fund investment reduces one asset (cash) andincreases another asset (mutual fund investment) These are also balancing entries on thebalance sheet and are not expenses

The solution is on ho 6

3 Prepare a Balance Sheet as of May 31 2007 All of the ending balances are in the facts exceptnet worth The following items affected net worth during the month

(a) net income for the month as shown on the income statement

(b) the increase in value of the mutual fund investment (not counting their additionalinvestment)


Additional Information

Kendra read the income statement and balance sheets and could not determine what accounted fortheir increase in net worth Accountants typically include a reconciliation of net worth in thefinancial statements so the reader of the statements can readily see the factors that increased (ordecreased) net worth during the year A Reconciliation appears below the Balance Sheet on ho 7

Kendra also asked why their cash balance increased less than their monthly income She wants toknow how the family spent their cash The Cash Flow Statement on ho 7 provides this informationto her We will discuss it in class


(1) Assets and Liabilities (FMV) (in alphabetical order) 43007 53107

401(k) retirement account $12500 $12600car loan current portion 317 317car loan remaining balance 12018 11771checking account 4000 4164condominium 235000 235000credit card balance 3178 2600IRA account 42000 42000mortgage loan current portion 1449 1449mortgage loan remaining balance 172666 172480mutual fund 22000 23700net worth 150872 savings account 10000 10000Toyota 15000 15000

(2) May Income

Kendrarsquos salary is $6500 per month the following amounts were deducted from her May paycheck

FICA (62 of her salary) $ 403medicare tax (145 of her salary) 94Federal income tax withheld 500Illinois income tax withheld 195health insurance premium 105401(k) contribution 100 total withheld 1397

(3) May Expenditures

car maintenance and gas $172clothing 111entertainment 147groceries 422miscellaneous 252utilities and telephone 375mortgage payment principal payment $186

interest 863 real estate tax 517

1566 1566car payment principal payment 246 interest 70

316 316mutual fund investment 1000 total expenditures 3981


FINANCIAL STATEMENTS

KENT FAMILY BALANCE SHEETas of April 30 2007

Assets Liabilities and Net Worth

Current Assets Current Liabilities Checking Account $ 4000 Credit Card $3178 Savings Account 10000 Car Loan current portion 317 Mutual Fund 22000 Mortgage Loan current portion 1449Total Current Assets 36000 Total Current Liabilities 4944

Other Assets Other Liabilities IRA 42000 Car Loan balance 12018 401(k) 12500 Mortgage Loan balance 172666 2003 Toyota 15000 Condominium 235000 Total Liabilities 189628

Net Worth 150872Total Assets $340500 Total Liabilities and Net Worth $340500

KENT FAMILY INCOME STATEMENTFor the month of May 2007

Revenues

Salary $6500

Expenses

Car Maintenance and Gas $172Clothing 111Entertainment 147Federal Withholding Tax 500FICA tax 403Groceries 422Health Insurance 105Illinois Income Tax 195Interest on Car Loan 70Interest on Mortgage Loan 863Medicare Tax 94Miscellaneous 252Real Estate Tax 517Utilities and Telephone 375 Total Expenses 4226 (4226)Surplus (Net Income) $2274


KENT FAMILY BALANCE SHEETas of May 31 2007


Current Assets Current Liabilities Checking Account $ 4164 Credit Card $ 2600 Savings Account 10000 Car Loan current portion 317 Mutual Fund 23700 Mortgage Loan current portion 1449Total Current Assets 37864 Total Current Liabilities 4366


Net Worth 153847

Total Assets $342464 Total Liabilities and Net Worth $342464

KENT FAMILY RECONCILIATION OF NET WORTHfor the month of May 2007

Additions to Net Worth May surplus $ 2274

Mutual fund appreciation 700 Total Additions 2974

Reductions in Net Worth 0 Increase in net worth 2974

Add Net Worth on April 30 2007 150872Equals Net Worth on May 31 2007 $153846

KENT FAMILY CASH FLOW STATEMENTfor the month of May 2007

Sources of Cash May Surplus $ 2274

Uses of Cash

For Debt Payments Car Loan Principal Payment $ 246 Mortgage Loan Principal Payment 186 Reduction of Credit Card Balance 578

Cash Used for Debt Payments 1010 (1010)

For Investments Investment in Mutual Fund 1000 401(k) contribution 100

Cash Used for Investments 1100 (1100)Increase in Cash $164

Add Cash on April 30 2007 4000Equals Cash on May 31 2007 $4164

Do not look at this material unless you are curious it is highly technical even for an1

introduction To get to the introduction click Overview in the Chart School Table of Contentsthen click Technical Analysis under ldquoMore Articles for New Chartistsrdquo


TECHNICAL ANALYSIS

The following statement about technical analysis and the chart at the bottom of the page appears inAn Introduction to Technical Analysis at httpwwwstockchartscomeducation I will discuss the1

chart briefly in class

Technical analysts consider the market to be 80 psychological and 20 logical Fundamentalanalysts consider the market to be 20 psychological and 80 logical Psychological or logicalmay be open for debate but there is no questioning the current price of a security After all it isavailable for all to see and nobody doubts its legitimacy The price set by the market reflects thesum knowledge of all participants and we are not dealing with lightweights here These participantshave considered (discounted) everything under the sun and settled on a price to buy or sell Theseare the forces of supply and demand at work By examining price action to determine which force isprevailing technical analysis focuses directly on the bottom line What is the price Where has itbeen Where is it going

Even though there are some universal principles and rules that can be applied it must beremembered that technical analysis is more an art form than a science As an art form it is subjectto interpretation However it is also flexible in its approach and each investor should use only thatwhich suits his or her style Developing a style takes time effort and dedication but the rewardscan be significant

raquo resistance (horizontal line)

raquo support (horizontal line)


New York Stock Exchange Closing Prices August 2 2007

Problems

1 Which stock traded the least shares on August 1

2 How was the dividend yield for ATampT computed

3 How much did ACCO Brands earn last year

4 Which stock has the best year-to-date performance and what was its dividend yield

5 The stock of the company in problem 4 closed at 795 per share on December 31 2005 If you hadpurchased shares on December 31 2005 what would be your percentage gain as of August 2 2007

6 Aaron Rents has declined almost 19 this year yet has a PE ratio of only 15 what might be theexplanation

7 Which stock increased the most on August 1 and how much has it increased year-to-date

8 Agco Corporation stock was up 87 in 2006 and is up about 36 in 2007 Note that the companyhad a loss for the last year it reported as indicated by the ldquoddrdquo in the PE column What do you thinkaccounts for these large increases What business is the company in


STOCK FUNDS OUTPERFORM SampP 500

By Chet Currier Bloomberg News December 25 2005

If you happen to hear a mutual-fund manager boasting of beating the stock market in 2005 temperyour enthusiasm Yes that may come as welcome news But no it wont qualify as a rare orastonishing feat Approaching year-end the average among more than 4000 stock funds tracked byBloomberg has trounced the Standard amp Poors 500 Index the stock index most commonly used as aperformance measuring stick Through the end of last week the average equity fund was up 10percent while the SampP 500 had gained 64 percent including dividends

Since the SampP 500 may be viewed as a US rather than a world stock index suppose we confine oursample to domestic growth growth-and-income and value funds Even then the average fund stillprevails up 8 percent All this continues a trend that was well under way as the year began Over thelast three years the average stock fund has gained 186 percent a year according to Bloomberg datawhile the SampP 500 returned 137 percent a year In the last five years the funds averaged a 47percent annual gain while the index edged up 1 percent per annum

Charts and graphs from 2005 may seldom be seen in all those textbooks describing how fundmanagers in general cant beat the market Surprise Not only have they been doing just that of latethey have made it look almost easy Cheery as this news may be for many a fund investor it cantempt us to draw unwarranted inferences

Compelling reasons have abounded to shy away from stocks ranging from interest-rate increases bythe Federal Reserve to long spells of sluggish behavior by the stock market itself Secondly afundamental common-sense principle of investing hasnt been repealed It remains impossible for allparticipants in a market collectively to beat that market The average result will inevitably be averageand no more than that

If the average return achieved by market participants manages somehow to exceed the showing of amarket index for a sustained period that may say more about the idiosyncrasies of the index thanabout the superior skills of the average investor Get a better index the random-walkers will say andwe will correctly see once again that investors as a group cant beat the game Now to make a truly fair comparison between funds and an index such as the SampP 500 we shouldntuse a simple average of all the funds Funds with a lot of assets ought to carry more weightproportionately than smaller ones Yet in one group of big funds I looked at a clear majority beat theSampP 500

Among 66 US-based stock funds with assets of $10 billion or more 47 had year-to-date gainsthrough the end of last week that exceeded the SampP 500s Many of these winners focus on somethingother than the big US blue chips that dominate the SampP 500 Some go the international route othersconcentrate on small- or mid-caps

Indeed specialized index funds in those niches proved just as able as managed funds to beat the SampP500 So a skeptic can say the preponderance of market-beaters was a fluke It just so happens that thebig stocks in the SampP 500 have been suffering through a long cold spell making everybody else lookgood My question is isnt that what investing is all about mdash being in the right place at the right timeIf you define the terms of the game so that picking your spots doesnt count no wonder it comes outas no contest


WHEN MARKETS SWING INDEXES RULE

by Carolyn Bigda Chicago Tribune August 5 2007

Watching the stock market stumble as it did late last month when the Dow Jones industrial averagesank more than 585 points in a week is unsettling In just one day that week for example the year-to-date return on the Dow went from 106 percent to 81 percent casting a pall on even the brightestof summer afternoons

Its not uncommon to react to these events Should you pull your money out of the stock marketShould you search for funds with managers who can find stocks moving up instead of down or optfor low-cost index funds that mirror market benchmarks

The folks at Lipper Inc a supplier of mutual-fund data recently took up the last question Theyfound that so-called actively managed funds -- in which a fund manager hand-picks stocks -- tend todo well in stable markets (when there are no big swings up or down) Indeed through the end ofJune about three-fourths of diversified US equity funds beat the index according to AndrewClark head of research for the Americas at Lipper [emphasis added]

But in periods where the market takes enormous leaps in either direction so-called passive fundsthat simply track an index rule the day When theres a strong move up or down where almostevery stock performs that way the active managers skill to pick stocks is swamped Clark saidThere is some tremor thats moving everything

He points to the last quarter of 2005 as an example For the majority of the year actively managedfunds excelled But when the market took off at the end of that year passive funds outperformedactively managed funds by as much as 3 percentage points Clark said In the current market climatethere may be a case for holding at least a small portion of your investments in actively managedfunds and hanging on to your index funds for the long term

Some things to keep in mind

- SPLIT IT As a general guideline Clark suggests investing 50 percent of your portfolio into indexfunds such as the Vanguard 500 Index Fund or the iShares MSCI EAFE Index Over long periodsof time -- 10 years or more -- studies show that passive funds outperform actively managed stocks

Why One word expenses

Because a manager must research and select stocks individually actively managed funds tend tocharge higher fees than index funds In fact the average expense ratio for index funds is 073percent compared with 144 percent for actively managed funds according to Chicago-basedMorningstar Inc which provides investment information (The expense ratio is a funds totalexpenses expressed as a percentage of the assets in the fund)

Expenses are taken out of returns and over time the compounding effect can have a big impact onperformance said Russel Kinnel director of mutual fund research for Morningstar

But as Clark noted actively managed funds will at times outperform And by investing 50 percentor so of your portfolio in these funds you could boost your returns


Perfect your portfolio - and take a rest Picking stocks is hard ETFs ease the pain while still letting you benefit from the markets potential

By Howard R Gold Money Magazine Additional reporting by Carolyn Bigda

NEW YORK (Money Magazine) -- Some time after the market collapsed in the spring of 2000 youprobably realized theres nothing simple about picking stocks To do it right you need to make surethe company in which youre investing is well managed financially solid and in an industry withdecent prospects That means plowing through earnings statements finding good sources ofindependent research and assessing the integrity of the executive suite Even stock uumlber-jock JimCramer who pounds the table for his favorites on CNBC urges viewers to spend an hour a weekresearching each individual stock they own

Thats a hefty part-time job and theres even more to it Should you sell a losing stock Are youproperly diversified People are overwhelmed says Louis P Stanasolovich president and chiefexecutive officer of Legend Financial Advisors in Pittsburgh They cant pick stocks on a day-to-day basis

Its no wonder that the percentage of US households that own individual stocks hasnt budgedsince 1999 And that so-called passive investing in index funds and one-stop investing throughtarget-date retirement funds are gaining in popularity Theyre a snap to use and they work well formost people

But theyre also one-size-fits-all approaches that can have significant shortcomings Plus if you likeinvesting theyre not much fun What would be great then is a way to bridge the gap between easyplain-vanilla investing and difficult old-fashioned stock picking

Enter exchange-traded funds ETFs are index funds that trade all day just as stocks do and covereverything from equities to bonds to commodities Your broker can sell you ETFs tied to industriesprecious metals Standard amp Poors 500 index Treasury bonds the euro or growth or value stocks ETFs offer you the chance to be an active investor with less risk than if you picked individualstocks and bonds says Brian S Orol president of Strategic Wealth Group in Raleigh NC Theyallow you to take 10 to 20 of a portfolio and let it be actively managed in a simple cost-effective fashion

There are now more than 270 ETFs with total assets exceeding $350 billion trading on USexchanges Thats a drop in the bucket compared with the $96 trillion invested in mutual funds butETFs have grown fourfold in the past five years Heres how you can use them as a passiveaggressive investor

Looking for value

Traditional index funds tied to a total market index like the Wilshire 5000 should make up the coreof most peoples portfolios But they can be pretty blunt instruments Thats because theyreweighted by the stock market value of their components so as stocks heat up they make up anincreasingly large portion of the index That is until they turn cold In the late 1990s technologystocks became a bigger and bigger part of the market When the stocks crashed they took downindex funds with them

In addition if you held such funds then you had comparatively little invested in out-of-favor energyand basic-materials stocks which became the stars of this decade ETFs allow you to put moneyinto market sectors that look undervalued without having to pick individual stocks or pay the highfees charged by mutual funds that specialize in an industry Lets say you think that technologystocks which have underperformed the broader market over the past five years look like bargains


You can put an extra sliver - say 5 - of your equity holdings into the SampP Select TechnologySPDR (XLK (Charts) or the iShares Goldman Sachs Technology Index ETF (IGM (Charts) whichhold large tech names such as Apple Computer Intel and Microsoft as well as smaller companiesYoull benefit as techs fortunes improve but you wont have to bet on how Apples iPod will fareagainst coming competition or on whether Intel will win its escalating chip war with AMD Or maybe youre convinced that the market as a whole is making a major turn Theres good reasonfor that belief Large-company growth stocks were among the best-performing asset classes from1994 to 1999 In every year since they have been laggards

But Money Magazines Michael Sivy and other commentators have been arguing that these stocksare really undervalued now If you agree you might buy the iShares Russell 1000 Growth IndexETF (IWF (Charts) or the Vanguard Growth ETF (VUG (Charts) which own blue-chip warhorsesincluding General Electric and Johnson amp Johnson (You can also buy mutual funds that trackgrowth indexes)

Widening your options

ETFs can also give you a stake in commodities including oil natural gas and industrial metals aswell as precious metals such as gold Academic studies suggest that an investment in commoditiesincreases a portfolios diversification making it less likely that youll suffer a catastrophic loss whenstocks take a dive

Prior to the advent of exchange-traded funds there was no easy way for individual investors toinvest in stuff As a substitute you could have bought a natural-resources mutual fund but thesefunds generally carry high expenses -and they invest in companies not commodities Nowhowever you can purchase the iShares GSCI Commodity-Indexed Trust (GSG (Charts) which has74 of its weighting in energy products or the PowerShares DB Commodity Index Tracking Fund(DBF (Charts) with a 55 concentration in energy (Instead of buying and holding actualcommodities these funds try to mimic an index by trading futures contracts)

Investor know thyself

Of course if you had been watching oil prices rise over the past year and then jumped into an ETFthat tracks them this spring you lost a big chunk of your investment in recent months One of theproblems with active investing is that amateurs and pros alike are given to chasing hot performersonly to get burned

And ETFs certainly make that easy to do If you cant check those impulses stick with a passiveindexing approach ETFs also arent a good way to regularly invest small amounts of moneybecause you have to pay a brokerage fee to buy them Even if youre paying just $10 a trade at adiscount brokerage youll lose 5 of a $200 investment to a commission And you wont hit homeruns with exchange-traded funds There is no Google ETF

On the other hand you also are not going to face the kind of meltdown that even blue-chip stocksoccasionally undergo In mid-July for example Internet stalwart Yahoo reported earnings in linewith Wall Streets estimates as revenue surged 28 But the company also announced a delay in anew system to serve online search ads a field in which Yahoo trails Google

The result Yahoos stock tanked 22 its biggest one-day drop ever Overnight shareholders foundthemselves $10 billion poorer (The stock also dropped 11 one day in September when it warnedof weak third-quarter advertising sales)

This kind of volatility makes it hard to stay the course as an active investor and gives rise to thekind of frenetic buying and selling that hurts you in the long run So it is worth remembering that onthe day Yahoo plunged ETFs tracking technology indexes barely budged


TIME VALUE OF MONEY

Another crucial principle used to analyze competing investment opportunities is the time value ofmoney which consists of four different computations

1 the present value of a dollar (how much is an amount to be received in the future worth today)

2 the future value of a dollar (how much will a present amount be worth at a time in the future) 3 the present value of an annuity (how much is a series of payments to be received worth today)4 future value of an annuity (how much will a series of payments be worth in the future)

An algebraic formula tables or a calculator can be used to calculate the time value of money We willuse the calculator available at httpwwwuiceduclassesactgactg500pfvatutorhtm to make thecomputations Click on the link and keep it open on your desktop as you read this handout Enterdollar amounts in the calculator without commas

1 Present Value of a Dollar (ldquoPVrdquo)

The technique used to translate the value of future dollars back to the present is discounting and thevalue of those discounted dollars is the present value An investor would prefer to receive $100 todayrather than $100 a year from now If the investor receives $100 today she can invest it and will havemore than $100 in a year The value of a dollar today is $1 the value today of a right to receive adollar one year from now is less than $1

Charles has a right to receive $1200 one year from now how much is it worth today if the currentinterest rate is 5 What is the present value of $1200 to be received in one year discounted at5 Enter the following amounts in the Present Value calculator 1200 (without a comma) in theAmount to be received in the future (ldquoamountrdquo) field 5 in the Annual Interest Rate (ldquoraterdquo) field 1in the Number of times interest is compounded (ldquocompoundrdquo) field and 1 in the Number of Years(ldquoyearsrdquo) field Click ldquocalculaterdquo The present value of $1200 discounted for one year at 5 is$1143 (always round the computations)

The $57 difference between the $1200 future value and the $1143 present value is interest Inother words if an investor deposited $1143 for one year in a savings account paying 5 interest itwould be worth $1200 at the end of the year

amount field ordm

interest field ordm

compound field ordm

years field ordm


Zero coupon bonds which we will study later do not pay interest each year instead they pay aspecified amount at some time in the future Assume a zero coupon bond will pay $1000 ten yearsfrom now and the current interest rate is 6 How much should an investor pay for that bond Whatis the present value of $1000 discounted at 6 for ten years Enter $1000 in the amount field ofthe present value calculator 6 in the rate field 1 in the compound field and 10 in the years fieldThe present value is $559 To put it another way if the investor deposited $559 in a 10-yearcertificate of deposit with a 6 interest rate she will have $1000 at the end of ten years

2 Future Value of a Dollar (ldquoFVrdquo)

The present value calculation brings cash from the future back to the present A guture valuecalculation brings current values into the future This calculation determines how much an amountinvested today will be worth in the future

Andrew deposits $1500 in a savings account that pays 6 annually and wants to know what theaccount will be worth in five years Use the future value calculator and enter 1500 in the AmountNow (ldquoamountrdquo) field 6 in rate field 1 in the compound field and 5 in the years field Clickcalculate the future value is $2007 He will have earned $507 of interest in the five years ($2007ending balance minus the $1500 beginning balance)


3 Present Value of an Annuity (PVA)

An annuity is a series of equal payments to be received each year for a specified period The presentvalue of an annuity calculates the present value of all of the payments to be received in the future

Spak won a $10 million lottery payable in 20 annual installments of $500000 (This state lotterydid not give the winner an option to receive a lump sum) He is considering selling the right to hisfuture payments and wants to know their present value if the current interest rate is 5 What is thepresent value of the right to receive $500000 per year for 20 years discounted at 5 Enter500000 in the Payment Amount ldquo(paymentrdquo) field of the Present Amount of an Ordinary Annuitycalculator 5 in the rate field and 20 in the payments field Click calculate The present value is$6231105

4 Future Value of an Annuity

The future value of an annuity calculates how much an investor will have at the end of a specifiedtime if is she contributes an equal amount each year The calculation is similar to the future valueof a dollar except instead of one payment there is a series of payments

Halpern deposits $4000 to his 401(k) account every year for thirty years we will assume it willearn at the rate of 8 How much will the account be worth in 30 years Enter 4000 in amount fieldof the Future Value of an Ordinary Annuity calculator 8 in the rate field and 30 in the years fieldThe future value is $453133

Halpern deposited only $120000 of his own funds ($4000 x 30 years) the $333133 balance of theaccount is income he earned


If Halpern contributed $4000 a year for 40 years instead of 30 the account balance will grow to$1036226 He invested $160000 and he will have earned $876226

Simple Interest vs Compounded Interest

Another key concept is compounding or compound interest That is the ability to earn interest onthe interest accumulated in prior periods This is a very important concept that has manyapplications in personal investing Simple interest refers to the case where interest is paidon the original principal amount of the loan or investment So for instance if a bank offered to pay5 simple interest on a $1000 investment it would pay $50 each year for the life of theinvestment

Typically most banks pay interest compounded either monthly or daily If interest is compoundedmonthly interest earned in the month will be added to the account and will begin earning interestthe next month When a bank quotes an interest rate they quote it as an annual percentage rate(APR) and a compounding interval (eg ldquocompounded dailyrdquo or ldquocompounded monthlyrdquo)

Compare the APR of a bank account that pays 7 interest compounded annually with one thatcompounds the interest daily Enter 1 in the amount field of the future value calculator 7 in theinterest field 1 in the number of years field and the number of times interest is compounded in ayear in the compound field Click calculate the annual effective yield appears in the future valuefactor field The APR of the account compounded daily is 725 compared with a 7 APR for theaccount that compounds interest annually


Berry invests $10000 in a certificate of deposit (CD) for five years paying 8 interest compoundedannually Larry invests in a similar CD but interest is compounded daily The number of timesinterest is compounded in a year is entered in the compound field Larryrsquos ending balance of$14918 is $225 higher than Berryrsquos balance of $14693

Berry Larry

Compound Interest for an Annuity

In the previous example we calculated the future value of a single payment using differentcompounding calculations The future value table has a field to enter the number of times interest iscompounded each year

We use the future value of an annuity calculator to compute the future value of a series of paymentsIf interest is compounded more than once a year we have to adjust the amount entered in the ratefield Divide the annual interest rate by the number of times per year interest is compounded Letrsquosconsider Halpernrsquos investment at the top of the previous page If he contributed $33333 per monthinstead of $4000 once a year enter $33333 in the payment field The annual interest rate is 8 butthe first monthly contribution will earn interest for only one month before the second contribution isadded Therefore divide the 8 annual interest by 12 (months) to get a monthly interest rate of667 The final balance of his account will be $1163852 which is $127626 more than the$1036226 balance when he made a single payment per year

raquo adjusted number of payments


The Miracle of Compound Interest

Marge invested $4000 per year in her IRA account for eight years compounding at 8frac34 Bobinvested $4000 per year at 8frac34 for 32 years but started investing 8 years later than Marge Margecontributed $32000 ($4000 x 8 years) and Bob contributed $128000 ($4000 x 32 years) Bobcontributed four times more than Marge but at the end of 40 years his ending balance is less thanhers Marge earned $113890 more interest than Bob earned Savings grow at an astonishing ratewhen left to compound for many years The sooner you begin saving for retirement the larger yourretirement fund will be

Margersquos Early Funding Bobrsquos Late Funding

Year Contribution Year-end Value Contribution Year-end Value

1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446

Investment $ 32000 Investment $128000

Interest 664320 Interest 550430

Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1

What is the present value of $100 payable in one year if the discount rate is 3 $100 payable inone year if the discount rate is 7 $100 payable in three years if the discount rate is 7

Problem 2

What is the present value of 5 annual $1000 payments discounted at 5

Problem 3

What is the present of the following payments at an interest rate of 5 $100 in year 1 $200 in year2 $300 in year 3 (These payments are not equal so you cannot use the PV of an annuity calculatorCalculate the present value of each payment separately and total the results)

Problem 4

Which is a more attractive stream of cash flows $100 per year for 5 years or $600 all in year 5 ifthe interest rate is 5

Problem 5

What is the future value of an investment of $1000 that earns 5 for 4 years For 7 years

Problem 6

How large an investment would be required to produce a future value of $1000000 in 10 yearsassuming an interest rate of 5 (The future value is $1000000 and you want to compute thepresent value)

Problem 7

Allison has $25000 in her 401(k) plan and will contribute $5000 each year until she retires in 30years Assume the current interest rate is 8 What will be the value of the 401(k) plan when sheretires Use the following steps to solve the problem

(1) Calculate the future value of the $25000 currently in the plan at 8 for 30 years

(2) Calculate the future value of an annuity of 30 payments of $5000 at 8

(3) The sum of the two calculations is the value of the 401(k) at retirement

Problem 8

Which is a higher effective interest rate (APR) 5 APR compounded annually 49 APRcompounded monthly or 48 APR compounded daily


Problem 9

Harold is planning for his retirement and his goal is a nest egg of $1500000 at retirement in 30years He will invest $100000 today in a 6 CD In ten years he will make a second investmentthat will grow at 5 annually How much will Haroldrsquos second investment have to be Use thefollowing steps to solve the problem

(1) Determine the value of the CD at retirement this will be amount ldquoXrdquo

(2) Subtract X from the $15 million goal to determine ldquoYrdquo the amount needed at retirementfrom the second investment ldquoYrdquo represents the future value of an amount invested for 20years at 5 You have to calculate ldquoZrdquo the present value of ldquoYrdquo

(3) Enter ldquoYrdquo in the amount field of the present value calculator invested for 20 years at 5The result is ldquoZrdquo the amount of his second investment

Problem 10

Same facts as problem 9 except after 10 years he wants to make 20 annual payments to reach hisgoal instead of investing a lump sum How much must he invest each year Use the following stepsto calculate the amount he must contribute each year

(1) Enter 1 in the payment field of the future value of an annuity calculator 5 in the interest ratefield and 20 in the payments field Click calculate the future value factor is 33066

(2) Answer ldquoYrdquo from step (2) in problem 9 is the amount of additional funds he needs to reachhis $15 million goal That amount represents the future value of the 20 payments he willstart making 10 years from now Divide ldquoYrdquo by the 33066 future value factor to calculatethe amount of each payment required

Problem 11

Abby invests $100000 for 30-years in a mutual fund that charges an annual fee of 118 Her sisterJenny invests the same amount in a fund that charges only 018 per year Assume that both fundsreturn 10 annually (before fees) How much more will Jennyrsquos fund be worth than Abbyrsquos in 30years Note Jennyrsquos fund will earn 1 per year more than Abbyrsquos after fees Compute the futurevalue of $100000 at 1 for 30 years to determine the difference in performance

Problem 12

Jake buys $125 of Mutual Fund A which has a 21 front-end load Wendy buys $125 of MutualFund B which has a 4 back-end load Both mutual funds grow at 9 annually Which investorrsquosfund is more valuable in five years

Compute the future value of their respective investments subtract the front-end load from Jakersquosinvestment before the calculation Subtract the back-end load from Wendyrsquos total then compare thetwo results


BONDS

Introduction

If an investor buys a new bond and plans to keep it to maturity changing prices interest rates andyields typically does not affect her She will generally pay $1000 for the bond and will receive$1000 at maturity

However when you buy or sell an existing bond the price investors are willing to pay for the bondmay fluctuate The bonds yield or the expected return on the bond may also change The priceinvestors are willing to pay for a bond is affected largely by prevailing interest rates If you buy anew bond and sell it before maturity the selling price may be more or less than $1000 dependingon interest rates prevailing at the time you sell the bond and other factors

Bond prices are quoted in percentage of face (par) value par value of a bond is always $1000 Ifthe price is 97 you can buy a $1000 bond for 97 of $1000 or $970 If price rises to 102 you willpay $1020 for the bond

Relationship Between Interest Rates and Bond Prices

Bond prices and interest rates move in opposite directions When prevailing interest rates risenewly issued bonds typically offer higher yields to keep pace When that happens existing bondswith lower coupon rates become less competitive Thats because investors are unlikely to buy anexisting bond offering a lower coupon rate unless they can get it at a lower price Thus higherinterest rates mean lower prices for existing bonds Conversely when interest rates fall an existingbonds coupon rate becomes more appealing to investors driving the price up


US TREASURY BONDS

This table shows the prices for US Treasury securities at noon on August 6 2007 The couponrate on the 30-year bond is 475 which means the bond pays $4750 of interest each year Theprice is 97-2532 because the bond is selling for less than par ($1000) it is selling at a discount

Bond prices are quoted in percentages of par so the market price of this bond is $1000 x 97-2532 (Treasury bonds are quoted in 32 of a percent) The fraction 2532 equals 78125 so thends

price is 9778125 or $97781 per bond The price is down 12frac3432 thus far or $398 per bond Afull point change equals $10 The fraction 12frac3432 = 398 that multiplied by $10 = $398

The current yield is 485 determined by the dividing the $4750 annual interest the $97781 priceof the bond Investors are more interested in the yield to maturity (YTM) of a bond which alsoconsiders the gain (or loss) the investor will realize at maturity This investor will receive $1000 atmaturity which is $2219 more than the $97781 paid for the bond This amount representsadditional interest and raises the yield to maturity for this bond to 489 the amount shown in theyield column Interest rates and bond prices move in opposite directions because the bond pricedecreased the yield went up

YIELD CURVE

This yield curve reflects the prices for US Treasury securities in the table at the top of the pageThe interest rate for 3-month Treasury bills was 485 the rate for 5-year Treasury bonds was 45and the rate for 30-year Treasury bonds was 489 This curve is relatively ldquoflatrdquo The investor whobuys a 30-year bond receives less than one-half percent additional interest over the 5-year bond


INVESTMENT GRADE BONDS

Investment grade bonds are rated triple-B or higher The Telus bond at the bottom of the table pays8 interest and matures in about four years The bond closed at 107606 or $107606 (Treasurybond prices are quoted in 32 of a percent but corporate bond prices are quoted in fractions of ands

whole percent) The bond is trading for more than par so it is selling at a premium

The current yield of the bond is 743 ($80 annual interest divide $1076 price) However the YTMshown in the last column is 5747 substantially less than the current yield When the bond isredeemed for $1000 in four years an investor who paid $1076 will lose $76 at maturity whichreduces the yield to maturity

You can estimate the YTM as follows by dividing the $76 loss at maturity by the four yearsremaining the result is $19 of loss per year Subtract the annual loss from the $80 annual interest toget $61 of net income each year Now divide $61 annual income by the $1076 cost to get anapproximate YTM of 567


US Two-Year Treasury Yield Rises Above 10-Year Note Yieldfrom Bloombergcom December 29 2005

US two-year Treasury yields rose above 10-year yields for the second time this week after a dropin existing home sales bolstered speculation the economy will slow in 2006 The NationalAssociation of Realtors report may reinforce the view that an inverted yield curve which occurswhen short-term yields exceed long-term yields heralds a slowdown Treasuries are up this monthamid signs a housing boom that Merrill Lynch amp Co analysts estimate accounted for about half theeconomic growth in the past five years is nearing an end

ldquoThe housing sector is definitely something everybody is focusing on in 2006rdquo said Rick Klingmanhead of US Treasury trading at ABN Amro Inc in New York ldquoIf people start to see the value oftheir homes heading lower theres no doubt we would see a slowdown in consumer spendingrdquo thebiggest part of the economy he said Klingman said he doesnt believe an inverted yield curveforeshadows a recession Housing

The National Association of Realtors said existing home sales fell to a 697 million annual rate inNovember from 709 million in October Treasuries rose on Nov 28 after the group said the pace ofhome sales fell a greater-than-expected 27 percent in October ldquoI see a clear risk that the housingmarket will cool which may lead to a drag on consumption and that will slow the economy saidPeter Mueller a fixed-income strategist at Commerzbank AG in Frankfurt ``Bond prices mayincrease if the housing data comes in weak

Yield Curve

Two-year yields have closed the gap with 10-year yields after the Fed raised interest rates 13 timessince June 2004 to a four-year high of 425 percent Two-year yields on Dec 27 rose above 10-yearyields for the first time since 2000 and exceed five-year note yields by 6 basis points Longer-termdebt usually yields more than shorter-term debt because investors take on more risk thelonger they wait for repayment Over the past 20 years 10-year yields exceeded two- year yieldsby 93 basis points on average ldquoI wouldnt read as much into the flatness of the yield curve as somedo mainly because Feds target rate adjusted for inflation remains low by historical standards saidSteve Bohlin head of corporate and government bonds at Thornburg Investment Management Incin Santa Fe New Mexico Fed Chairman Alan Greenspan has said a yield-curve inversion may notnecessarily portend slower growth


BOND PROBLEMS

Problem 1

If interest rates fall dramatically what would happen to the price of bonds Would long-term bondsor short-term bonds be affected more by changes in interest rates Why

Problem 2

Explain why the yield curve usually has the shape shown on casebook page 40

Problem 3

How much should your client pay for a 5 bond that matures in three years if current interest ratesare 4 Assume interest is paid only once at the end of each year (Hint Use the present value of anannuity calculator to compute the present value of the three annual interest payments using thecurrent rate of interest Then use the present value calculator to compute the present value of $1000to be received in three years The price of the bond is the total of these two amounts)

Problem 4

A $1000 10-year 5 bond was issued at par exactly one year ago Interest rates for a similar bondissued today are 6 How much should your client pay for the bond issued last year (HintCalculate the present value of the interest payments to be received and add the present value of$1000)

Problem 5

Your client wants to purchase one of the following bonds

(a) A $7 BB rated bond maturing in 7 years selling for $500 to yield 69

(b) A 35 AA rated bond maturing in 5 years selling for $400 to yield 511

Use the following steps to determine which bond he should buy

(1) Calculate the present value of the $1000 maturity value for each bond using the yield rateas the discount rate for the number of years remaining to maturity

(2) Calculate the present value of the interest payments discounted at the yield rate for the

number of years remaining to maturity (3) For each bond add the results in step (1) and (2) then subtract the cost of the respective

bond The result is the net present value of each bond The bond with the higher net presentvalue cost is the better purchase


US TREASURY ZERO COUPON BONDS

The buyer of a bond (or stock) pays the asked price the seller sells for the bid price The 2010August 15 bond is selling for $87544 to yield 445 You can use the present value calculatorto calculate the bondrsquos price


TAX-EXEMPT BONDS

TAXABLE AND TAX-FREE MONEY MARKET FUNDS

CONVERTIBLE BONDS

Problem 1

Which money market fund would be a better investment for an investor in the 35 bracket

Problem 2

Use the price in the ldquolastrdquo column and determine the current yield on the Halliburton bonds Whydoes the bond sell for such a high price Does the fact that each bond is convertible into 532 sharesof common stock that closed at $3427 on this date help explain the price


VANGUARD LIFE CYCLE FUNDS

Note how the allocation between stocks and bonds changes as the fund nears the target date and thediversification between domestic and international funds

2015 FUND

Performance as of 63007 1-year 1625 3-year 965 since inception on 102703 988

2045 FUND



INVESTMENT PERFORMANCE BY INVESTMENT TYPE


SHORT-SELLING

Google stock began public trading on August 19 2004 under the stock symbol GOOG On the firstday of trading GOOG closed at $100 per share and the price has risen almost steadily since then Thestock reached an all-time high at 55858 on July 16 2007 On August 9 2007 it closed at 51473

On July 16 Phil thought that the stock was due for a correction so he told his broker to sell 100shares of Google ldquoshortrdquo at the current market price The broker sold 100 shares at $558 andcredited Philrsquos account for the $55750 proceeds ($55800 selling price minus the $50 brokeragecommission) The brokerage company borrowed shares from the firmrsquos inventory for delivery to thebuyer

By August 9 he felt the stock had fallen far enough and told his broker to ldquocover his shortrdquo andclose the position The broker bought 100 shares for Phil at 515 and charged Philrsquos account for the$51550 ($51500 cost plus a $50 commission) The shares were returned to the firmrsquos inventoryPhil made $4200 on the trade calculated as follows

sales proceeds on 71607 $55750less purchase price on 8907 51550

$ 4200

Typically only sophisticated investors engage in short-selling In theory the potential loss isunlimited When you buy a stock the most you can lose is the cost of the shares the price cannotgo below zero When an investor sells shares short the shares may continue to rise and there is nolimit to how high the price can go At some point the short-seller must buy the shares back to closethe position


INVERSE (SHORT) MARKET CAP ETFS

Investors who want to buy some protection against a downturn in the market now have a relativelynew type of investment These are ldquoinverserdquo ETFs whose value moves inversely to changes inspecific indexes such as the SampP 500 and the Dow Jones Industrial Average Like all ETFs theytrade like a stock and can be purchased anytime during the market day

An inverse SampP 500 ETF is a negative bet on the SampP 500 and aims to provide a daily percentagemovement opposite to that of the SampP So if the SampP 500 rises by 1 the inverse ETF should fallby 1 and if the SampP falls by 1 the inverse ETF should rise by 1

Leveraged Inverse ETFs aim to provide some multiple of the opposite performance to theirbenchmark The ProShares UltraShort SampP500 ETF for example aims to provide double theopposite performance to the SampP 500 So if the SampP 500 rises by 1 the leveraged inverse ETFshould fall by 2 and if the SampP falls by 1 the inverse ETF should rise by 2

There are several reasons an investor may want short an index (1) A long term investor wants to byprotection against a market decline (2) A long term investor believes the market will fall and has alarge unrealized capital gain that she does not want to realize at this time (3) A short term traderwants to make a bearish bet on the market

Inverse and leveraged inverse ETFs usually have higher expense ratios than standard index ETFseven proportionate to the level of exposure Leveraged ETFs may perform poorly in flat marketsand can underperform their benchmarks in conditions of significant volatility

The Dow Jones Industrial Average declined 38718 points or 283 on August 9 2007 Followingare the price changes in the inverse ETFs on that day the ticker symbols are in parentheses

Index Short ETF UltraShort ETFDow Jones Industrial - 283 + 257 (DOG) + 530 (DXD)SampP 500 Index - 296 + 297 (SH) + 588 (SDS)Russell 2000 Index - 135 + 160 (RWM) + 309 (TWM)

For more information click httpetfseekingalphacomarticle31113


OPTIONS

Call Options

A call option entitles the holder to buy 100 shares of a given stock at a given price (ldquothe strikepricerdquo) by a specified date On December 2 2005 Google stock closed at $41770 Google calloptions closed at the following prices on that date

12205 quote on Google Calls Expiring 121605

Strike Price Quote Option Cost Intrinsic Value Option Value350 6820 $6820 $6770 $ 50390 2940 2940 2770 170400 2100 2100 1770 330410 1390 1390 770 620420 880 880 0 880450 145 145 0 145470 45 45 0 45

1 2 2 0 5 q u o t e o n G o o g l e Calls Expiring 12006

Strike Price Quote Option Cost Intrinsic Value Option Value350 6970 6970 6770 200390 3860 3860 2770 1090400 3200 3200 1770 1430410 2610 2610 770 1840420 2140 2140 0 2140450 1080 1080 0 1080470 670 670 0 670

The holder of a December 350 call had the right to buy 100 shares of Google until December 162005 for $35000 (100 shares x $350 per share) If the option holder exercised the option andpurchased 100 shares for $35000 she could have sold the shares at the $41770 market price onDecember 2 2005 That was $$6770 more than the strike price The excess of the market valueover the strike price is the ldquointrinsicrdquo value of the option The market value of that option was$6820 The remaining $50 cost of the option is the option value ie the amount an investor waswilling to pay for additional upside potential in the stock

Assume an investor purchased a December 420 call on December 2 2005 The option had nointrinsic value the right to buy 100 shares at $420 per share is worthless when the stock is sellingfor $41770 The entire $880 the investor paid for the option was for the option value the chancethat the stock would rise significantly above $420 before expiration in two weeks This option valuedeclines rapidly as the expiration date nears

On December 16 2005 Google closed at $43015 which made the December 420 call worth$1015 ($43015 value of 100 shares Google minus the $42000 to by 100 shares by exercising thecall option) If the investor who paid $880 for the option on December 2 2005 had not sold itbefore expiration she would have made a profit of $135 minus the commissions ($1015 value ofoption at expiration - $880 cost of option)


Put Options

A put entitles the holder to sell 100 shares of stock at a given price by a specified date OnDecember 2 2005 the day Google closed at $41770 Google puts closed at the following prices

12205 quote on Puts Expiring 121605

Strike Price Quote Option Cost Intrinsic Value Option Value390 150 $ 50 $ 0 $ 50

400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020

The holder of a December 390 put had the right to sell 100 shares of Google at $390 untilDecember 16 2005 The option will expire worthless if Google closes above $390 per share on121605 On December 2 2005 Google was selling for $2770 above the $390 strike price Thecost of this option was only $50 because it would likely expire worthless


Google closed at the following prices on the days in the table below

12205 41770121605 43015 (date December options expired)1406 4452411706 4671112006 39946 (date January options expired the stock plunged $6765 this day)

The following table shows the price of options on those dates

Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005

The dramatic price swings came on January expiration day On Friday January 17 2006 Googlewas selling for $46711 which made the January 420 calls worth about $4670 on that day By theclose Monday January 20 2006 those call options expired worthless

On the other hand an investor could have purchased a January 440 put for $200 on Friday January17 The right to sell 100 shares of Google stock at $440 per share with one day of trading left waspractically worthless when Google was selling at $467 that day However by the close on January20 2006 that option surged in price to $4005 The holder of the option could buy Google stock atits market price of $399 then sell it to the seller of the option for $440 per share

Options offer an opportunity to make substantial profits will a modest investment If an optionexpires worthless the investor loses the entire investment On the other hand because the loss islimited to the cost of the option the investor knows her maximum loss at the outset


CLASS GIFTS

Basic Rules If a member of the class dies before a condition is met her interest fails If a memberof the class is born before class closes that member participates

Problem at para 2552 p 154 Teresa creates a testamentary trust to pay income to her son Brian for life withremainder at Brianrsquos death to his children who reach age 21 Teresa dies survived by Brian and Brianrsquosminor children Jake and Chris Five years later Brian dies survived by three childrenmdashJake (age 22)Chris (age 12) and Terry (age 2) Chris dies a year later at age 13 and Terry eventually reaches age 21How should the trust principal be distributed What difference would it make if Brian had a fourth childwho survived Teresa but died before Brian at age 25

Facts

A testamentary trust created by Theresarsquos will provides a life estate for her son Brian with theremainder to Brianrsquos children who reach age 21

When Brian died three children survived him Jake age 22 Chris age 12 Terry age 2Each child is entitled to a of the trust contingent on reaching age 21 The value of the trust is$180000 (Note Terry is a member of the class of Brianrsquos children although she was born afterTheresa died The class of Brianrsquos children does not close until Brianrsquos death)

A Distributions (assuming the trust assets remain at $180000)

1 At Brianrsquos death

Jake has already survived to age 21 so $60000 is distributed to him (a of the $180000 trust)The trust is now worth $120000 which Chris and Terry will share if they reach age 21

2 At Chrisrsquos death before age 21 (value of trust $120000)

Chrisrsquos interest fails his $60000 is divided between Jake and Terry (provided she reaches age21) Jake gets a distribution of $30000 reducing the value of the trust to $90000 Terryrsquos shareremains in the trust until she reaches 21

3 When Terry reaches 21

The $90000 balance of the trust is distributed to her

Final result Jake and Terry each received $90000


B Distributions (assuming the trust assets appreciate)

It is unrealistic to assume that the trust assets will never appreciate Assuming the trust assetsappreciate over time (the values are assumed) the distributions will be as follows

1 At Brianrsquos death (trust value is $180000)

Jake has already survived to age 21 so $60000 is distributed to him (a of the $180000 trust)Chris and Terry are each entitled to one-half of the remaining trust if they reach age 21 Thetrust value is now $120000

2 At Chrisrsquos death before age 21 (the trust has appreciated to $144000)

Chrisrsquos interest fails so the half he would have been entitled to receive ($72000) is dividedbetween Jake and Terry (provided she reaches age 21) Jake gets a distribution of $36000reducing the value of the trust to $108000 Terryrsquos share remains in the trust until she reaches 21

3 When Terry reaches 21 (value of trust has appreciated to $112000)


Final result Jake received $96000 and Terry received $112000 from the trust Jake received his distributions earlier than Terry If he invested the $96000 he received beforeTerry presumably it would have increased in value

C Result when a beneficiary with a vested remainder predeceases the lift tenant

Last part of the question

What difference would it make if Brian had a fourth child (Frank) who survived Teresa but diedbefore Brian at age 25

Rule When a beneficiary with a vested interest dies his heirs are entitled to his share When Frankreached age 21 his interest in the trust vests and when he dies his heirs will get his share

Facts Brian died survived by Jake Chris and Terry son Frank died at 25

Distributions (assuming trust assets do not appreciate)


Jake and Frank had already reached age 21 Jake gets frac14 of the trust ($45000)Frankrsquos heirs get his frac14 ($45000)The value of the trust is reduced to $90000 for Chris and Terry to share if they reach age 21

2 At Chrisrsquos death before age 21

When Chris died Jake Frankrsquos heirs and Terry (if she reaches 21) are each entitled to $15000 (aof Chrisrsquos $45000 share)$15000 distributions are made to Jake and Frankrsquos heirs reducing the value of the trust to $60000


When Terry reaches 21 she will receive the $60000 final value of the trust

Final result Jake Frankrsquos heirs and Terry each received $60000


CHAPTER 2 PROBLEMS

Assume the decedents in all of the problems are Illinois residents

Some problems refer to the Illinois Probate Act of 1975 (ldquoProbate Actrdquo) Chapter 755 Act 5 of theIllinois Compiled Statutes httpwwwobrestateilusLAWSLawshtm To find a section in theAct sect 4-3 for example clink the link scroll down to Chapter 755 Estates then click Act 5 ProbateAct of 1975 The first number of a citation is the Article number sect 4-3 is in Article IV click it andscroll down to sect 4-3

Problem 1

What are the functions of probate and the major responsibilities of the personal representative What are the disadvantages with probate When is probate required

Problem 2

Do attesting witnesses have to appear in court in Illinois to admit the will to probate

Problem 3

Johnston is an 87-year-old physician with a wife and two adult children who are lawyers He retainsyou to write a new will leaving one-half of his substantial estate to his 37-year-old personalassistant He has the mental capacity to make this decision

(a) What steps might you take to make sure this gift survives a potential will contest by hisfamily

(b) Johnston wants you to draft a provision making a substantial bequest to you to show hisappreciation for the outstanding legal advice you have given him Is there a problem with thisHow would you suggest this be handled See Rule 18 of the Illinois Rules of ProfessionalConduct at httpwwwiardcorgrulesdecisionshtml

Problem 4

Yvonne died intestate survived by her husband one minor child and one brother At her deathYvonne owned a $1500 bank account miscellaneous personal effects household items worthabout $1000 and $90000 of securities She also owned a $200000 insurance policy on her lifeher surviving spouse is the beneficiary At her death she owed various undisputed small debtstotaling $500

Is it necessary or desirable to open an estate administration If not how will the surviving spouseobtain title to the bank account and the securities See Probate Act sectsect 25-1(a) and (b)(6)


Problem 5

Martin died intestate determine how his estate should be distributed if the following relativessurvive him See Probate Act sect 2-1 (a) - (d) which follows the ldquostrictrdquo per stirpes rule

(a) his wife Walda and son Stuart

(b) Walda Stuart and daughter Diane

(c) Walda and his mother Margaret

(d) Margaret and his sister Sarah

(e) Walda Stuart and Dianersquos children Gary and Gabi

(f) son Stuart and grandchildren Gary and Gabi

(g) Granddaughter Gail Stuartrsquos daughter Gary and Gabi

Problem 6

Randall signs his will in a hospital in the presence of Lucy and Marvin and asks them to witness thewill As Lucy steps forward Marvin suddenly has to sneeze Not wanting to contaminate RandallMarvin steps briefly around the curtain and sneezes twice while Lucy signs the will as a witnessMarvin then signs the will as a witness Is the will admissible to probate in Illinois See ProbateAct sect 4-3(a)

Problem 7

Sharon a widow bequeathed one-half of her estate to her daughter Emily and one-fourth to each ofSharonrsquos sons Emily was one of two of the willrsquos witnesses and the estate was worth $120000when Sharon died See Probate Act sect 4-6(a)

(a) Is the will valid

(b) How much will each child inherit

Problem 8

Jessicarsquos attorney recommends that she execute a pourover will

(a) What are the advantages of a pourover will

(b) Are they permitted in Illinois If so what must Jessica do before she executes the will See thefirst two sentences of sect 4-4

Problem 9

Margersquos will left $10000 to her grandson Phil She later drew a line through the $10000 wrote$15000 above it and initialed the change How much will Phil inherit See sect 4-9

Problem 10

Bob and Karen have been married for 20 years and are about to purchase a retirementcondominium Would you recommend they take title as joint tenants or as tenants by the entiretyWhat are the advantages and disadvantages of each


Problem 11

(1) Richard is married has one adult daughter and dies intestate How will his estate bedistributed See Probate Act sect 2-1

(2) Richard dies with a will that leaves his entire $300000 probate estate to his daughter andexpressly disinherits his wife His wife renounces his will

(a) How will the estate be distributed See Probate Act sect 2-8(a)

(b) What result if he did not have a daughter and the will left his entire estate to his brother

(c) What result if he did not have a daughter and he left $100000 to his sister and the residueto his brother See Probate Act sect 2-8(d)

Problem 12

Walter and Beverly Smith live have two small children Walter has $250000 of assets in his nameand Beverly has $50000 in her name They do not think they need wills because of the modest sizeof their estate

(a) What are some problems the survivor might have to contend with if one spouse dies intestate

(b) What would happen to their property and their children if they die intestate simultaneously inan accident

(c) What provisions would you include in their wills to alleviate some of these problems


Pritzker Heirs Settle Family Feud Over Inheritance for $560 MillionBloombergcom January 7 2005

Jan 7 (Bloomberg) -- Actress Liesel Pritzker and her brother Matthew agreed to accept $560million to settle $2 billion in claims that family members cheated them out of their inheritance aperson familiar with the matter said Liesel Pritzker 20 and her brother Matthew 22 will get $280million each in cash paid in equal shares by 11 relatives including Thomas Pritzker chairman ofHyatt Corp The two also will get to keep $170 million they received previously to resolve theirclaims the person said The two Pritzker heirs had threatened in their April lawsuit to interferewith plans to split up the holdings of one of the worlds richest families The Pritzker fortuneincludes the 209- hotel Hyatt chain commercial real estate industrial businesses and a 25 percentstake in Royal Caribbean Cruises

ldquoThe settlement lifts a big question mark on the familyrsquos ownership structure and clears the way fora possible public offeringrdquo said Roger Cline head of consulting firm Roundhill Hospitality inRoslyn Heights New York ldquoWall Street has become very bullish on hotel stocks generally I cantthink of a better time than this year to take Hyatt publicrdquo

The largest part of the settlement will be paid by Liesel and Matthews father Robert Pritzker 78who also sued He agreed use a $200 million trust to reimburse charitable foundations of the other11 Pritzker defendants for their $560 million in settlement payments upon his death ldquoWe havedefinitely achieved what we set out to dordquo Dan K Webb an attorney for Matthew Pritzker said ina statement Liesel and Matthew Pritzker claimed in their lawsuit that their trust fund assets weretransferred to accounts benefitting other family members and the Pritzker Foundation a Chicagocharity

Trusts

ldquoWe filed Lieselrsquos lawsuit to find out exactly what happened to her trusts when she was a younggirlrdquo said Lazar P Raynal a lawyer for Liesel Pritzker in a statement ldquoOnce we accomplished thatgoal we were in a position to resolve all financial issues relating to the trusts That has been done toLieselrsquos full and complete satisfactionrdquo Robert Pritzker denied in an e-mailed statement that he haddone anything improper He said he had ldquoacted appropriately and with integrity as their trusteerdquo Hesaid he is ldquoproud of Lieselrsquos actingrdquo and ldquovery closerdquo to Matthew Liesel Pritzker appeared in themovies ldquoA Little Princessrdquo and ldquoAir Force Onerdquo under the stage name Liesel Matthews

Liesel and Matthew Pritzker claimed in the suit that their father emptied their trust funds in 1994ldquowith malicious and vindictive intentrdquo because of animosity over his divorce with their mother Inaddition to the return of about $2 billion in assets that the two siblings claimed were taken fromtheir trusts Matthew and Liesel also wanted punitive damages and to oust Robert and ThomasPritzker and Pritzker family tax lawyer Marshall Eisenberg who was also named in the suit astrustees of all remaining trusts for Matthew and Liesel Yesterdayrsquos settlement was paid into trustsunder new trustees of the siblingsrsquo choosing the person said


5 When you buy insurance choose the highest deductible you can afford Itrsquos the easiest way tolower your premium Itrsquos the open secret of the insurance game File a claim your premiums goup For that reason itrsquos in your interest ndash as much as possible ndash to shoulder small damages out ofpocket For home insurance raising your deductible from $500 to $1000 could save you 25 onpremiums according to the Insurance Information Institute

6 The best way to improve your credit score is to pay bills on time and to borrow no more than30 of your available credit It also helps to pay off debt rather than moving it around becausethe ratio of your credit card balance to your credit limit is key Say you owe a total of $2000 onfour credit cards each of which has a $2000 limit Your total credit limit is $8000 of which yourtotal balance ($2000) accounts for 25 If you transfer all your balances to two cards and cancelthe other two your total credit limit is reduced to $4000 and your $2000 balance now accounts for50 of that limit Also donrsquot open new accounts when applying for a loan if possible

INVESTING

7 All else being equal the best place to invest is a 401(k) Once yoursquove earned the full companymatch max out a Roth IRA Still have money to invest Put more in your 401(k) or a traditionalIRA One of the keys to saving for the long run is keeping as much money as possible shielded fromtaxes A 401(k) gives you that and more You also get an immediate tax break becausecontributions come out of your paycheck before taxes are withheld And therersquos the possibility of amatching contribution from your employer ndash thatrsquos free money The federal limit on annualcontributions has been increasing gradually and is $15000 in 2006 If yoursquore 50 or older you maycontribute an additional $5000 With a Roth IRA you get no immediate tax break but withdrawalsin retirement will be tax-free You can make at least a partial contribution to a Roth if yourmodified adjusted gross income is less than $110000 if yoursquore single or less than $160000 ifyoursquore married and filing jointly

8 To figure out what percentage of your money should be in stocks subtract your age from 120Since 1926 stocks have returned an annual average of 105 percent long-term government bondsreturned 51 percent and cash measured by Treasury bills and other short-term investments hasreturned just 31 percent In other words if yoursquore investing for the long-term stocks are the placeto be But in the short term the stock market can be downright dangerous with much more severedrops than the bond market has Thatrsquos where this rule comes in - the younger you are the moretime you have to recover from stock-market crashes As you get older you should gradually movemoney out of stocks and into bonds

9 Invest no more than 10 of your portfolio in your company stock - or any single companyrsquosstock for that matter In a bear market itrsquos tough to find a safe-haven ndash a lot of the stocks in yourportfolio will be sinking too But donrsquot compound the risk by holding too much in any one stockThe most recent dramatic example of just how serious this specific-stock risk can be is Enronwhich imploded after its executives allegedly engaged in various acts of malfeasance But acompany with perfectly honest management might fall on hard times too And if itrsquos youremployerrsquos stock yoursquore in an even worse position ndash not only will your portfolio be decimated butyour job could be at risk

10 The most you should pay in annual fees for a mutual fund is 1 for a large-company stockfund 13 for any other type of stock fund and 06 for a US bond fund Running a mutualfund isnrsquot free ndash companies have to pay for research managersrsquo salaries and so on Those costs areborne by the investors in the funds and get deducted from returns A percentage point here and theremay not sound like much but a fund manager needs to pick a lot of great stocks to make up forthose costs




HOME AND MORTGAGE






FACTS


PROBLEMS
















(2) May Income
















Revenues

Salary $6500

Expenses







Net Worth 153847









Uses of Cash









TECHNICAL ANALYSIS









Problems










































Looking for value
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts






HOME AND MORTGAGE






FACTS


PROBLEMS
















(2) May Income
















Revenues

Salary $6500

Expenses







Net Worth 153847









Uses of Cash









TECHNICAL ANALYSIS









Problems










































Looking for value
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts





FACTS


PROBLEMS
















(2) May Income
















Revenues

Salary $6500

Expenses







Net Worth 153847









Uses of Cash









TECHNICAL ANALYSIS









Problems










































Looking for value
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts






(2) May Income
















Revenues

Salary $6500

Expenses







Net Worth 153847









Uses of Cash









TECHNICAL ANALYSIS









Problems










































Looking for value
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts











Revenues

Salary $6500

Expenses







Net Worth 153847









Uses of Cash









TECHNICAL ANALYSIS









Problems










































Looking for value
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts








Net Worth 153847









Uses of Cash









TECHNICAL ANALYSIS









Problems










































Looking for value
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts






TECHNICAL ANALYSIS









Problems










































Looking for value
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts





Problems










































Looking for value
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




































Looking for value
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts
















TIME VALUE OF MONEY









amount field ordm

interest field ordm

compound field ordm

years field ordm






















Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts
























Berry Larry










1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts








1 $4000 $ 4350 0 0

2 4000 9081 0 0

3 4000 14226 0 0

4 4000 19821 0 0

5 4000 25905 0 0

6 4000 32522 0 0

7 4000 39718 0 0

8 4000 47543 0 0

9 51703 $4000 $ 4350

10 56227 4000 9081

11 61147 4000 14226

12 66497 4000 19821

13 72315 4000 25905

14 78643 4000 32522

15 85524 4000 39718

16 93007 4000 47543

17 101145 4000 56053

18 109995 4000 65308

19 119620 4000 75372

20 130087 4000 86317

21 141470 4000 98220

22 153849 4000 111164

23 167311 4000 125241

24 181951 4000 140550

25 197872 4000 157198

26 215186 4000 175303

27 234015 4000 194992

28 254491 4000 216404

29 276759 4000 239689

30 300975 4000 265012

31 327310 4000 292551

32 355950 4000 322499

33 387096 4000 355068

34 420967 4000 390486

35 457802 4000 429004

36 497860 4000 470892

37 541423 4000 516445

38 588798 4000 565984

39 640318 4000 619858

40 Balance $696346 4000 $678446



Total $696346 Total $678446


TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




TIME VALUE PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5


Problem 6


Problem 7





Problem 8



Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




Problem 9





Problem 10




Problem 11


Problem 12




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




BONDS

Introduction







US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




US TREASURY BONDS





YIELD CURVE













Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts














Yield Curve



BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




BOND PROBLEMS

Problem 1


Problem 2


Problem 3


Problem 4


Problem 5













TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts







TAX-EXEMPT BONDS


CONVERTIBLE BONDS

Problem 1


Problem 2





2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts






2015 FUND


2045 FUND





SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts






SHORT-SELLING





$ 4200













OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts














OPTIONS

Call Options










Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




Put Options




400 290 290 0 290 410 580 580 0 580

420 1020 1020 230 791430 1670 1670 1230 440440 2460 2460 2230 230


390 888 $ 888 $ 0 $ 888 400 1220 1220 0 1220 410 1650 1650 0 1650

420 2130 2130 230 1900430 2740 2740 1230 1510440 3400 3400 2230 1170450 4250 4250 3230 1020






Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts







Call Options

DateStock Price

1220541770

Expired12160543015

140644347

1170646711

Expired1200639946

Dec 400 2100 3000 x x x

Dec 420 880 1000 x x x

Dec 450 145 0 x x x

Dec 470 45 0 x x x

Jan 400 3200 3660 4550 6730 0

Jan 410 2610 2980 3570 5750 0

Jan 420 2140 2280 2740 4730 0

Jan 450 1080 920 960 1880 0

Jan 470 670 460 410 520 0

Put Options

DateStock Price

1220541770

12160543015

140644347

1170646711

Expired1200639946

Dec 390 150 0 x x x

Dec 410 580 0 x x x

Dec 420 1020 0 x x x

Dec 440 2460 1000 x x x

Jan 390 888 330 6 5 0

Jan 410 1650 780 195 10 1005

Jan 420 2130 1120 340 20 2005

Jan 440 3400 2080 1010 200 4005





CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




CLASS GIFTS



Facts



































CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts



























CHAPTER 2 PROBLEMS



Problem 1


Problem 2


Problem 3




Problem 4




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




Problem 5









Problem 6


Problem 7




Problem 8




Problem 9


Problem 10



Problem 11






Problem 12










Trusts




Problem 11






Problem 12










Trusts








Trusts



by kate ashford, carolyn bigda, george mannes, walter

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