Some investors think that the Rumple Shirt Co.'s repurchase program was a bad deal for shareholders, because the company paid too much for its repurchased shares
Before the repurchase, the company's shares traded for $30. Over the last quarter, Rumple repurchased 150 million shares (15% of shares outstanding) at an average price of $33 per share. Shares outstanding are now 850M. Calculate the stock price after the repurchase. If you bought 100 shares prior to the repurchase, and sold the same percentage of shares as Rumple repurchased (for the same price they paid), then what is your profit (loss) on the investment? (Assume that you sold the non-repurchased shares at the post-repurchase price.)
A) -$52.94
B) -$26.02
C) $0
D) $45
E) $300
C
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Assume that you recently graduated and landed a job as a financial planner with Cicero Services, an investment advisory company. Your first client recently inherited some assets and has asked you to evaluate them. The client owns a bond portfolio with $1 million invested in zero coupon Treasury bonds that mature in 10 years. The client also has $2 million invested in the stock of Blandy, Inc., a company that produces meat-and-potatoes frozen dinners. Blandy’s slogan is “Solid food for shaky times.”
Unfortunately, Congress and the president are engaged in an acrimonious dispute over the budget and the debt ceiling. The outcome of the dispute, which will not be resolved until the end of the year, will have a big impact on interest rates one year from now. Your first task is to determine the risk of the client’s bond portfolio. After consulting with the economists at your firm, you have specified five possible scenarios for the resolution of the dispute at the end of the year. For each scenario, you have estimated the probability of the scenario occurring and the impact on interest rates and bond prices if the scenario occurs. Given this information, you have calculated the rate of return on 10-year zero coupon Treasury bonds for each scenario. The probabilities and returns are shown below:
Throughout the world, the foreign exchange market is open for business only during the hours of 9 A.M. to 3 P.M., Pacific Standard Time.
a. True b. False