Exhibit 4-5 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 76

Multiple Choice

Exhibit 4-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
You decide to sell 100 shares of Topgun Enterprises Inc. short when it is selling at its yearly high of $42.25. Your broker tells you that your margin requirement is 60% and that the commission on the sale is $20. While you are short, Topgun pays a $0.85 per share dividend. At the end of one year you buy your Topgun shares (cover your short sale) at $44 and are charged a commission of $20 and a 5% interest rate.
-Suppose you buy a round lot of DG Solutions stock on 60% margin when it is selling at $55 per share. The broker charges a 10% annual interest rate and commissions are 3% of the total stock value on both the purchase and the sale. If at year end you receive a $1.10 per share dividend and sell the stock for 55 5/8, what is your rate of return on the investment?

• A) -10.38%
• B) -12.84%
• C) -10.95%
• D) 21.84%
• E) 28.38%

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Definitions:

Pulley Alignment

The process of adjusting the position of pulleys in a belt-driven system so that the belt runs straight and true, ensuring efficient operation and reducing wear.

Jumper Cables

Electrical cables with clamps at both ends, used to start a vehicle by connecting its dead battery to a live battery.

Dead Vehicle

A vehicle that is unable to start or move due to mechanical or electrical failures.

Battery Load Test

A diagnostic procedure to evaluate a vehicle's battery's ability to hold a charge under simulated start-up loads.