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:

Commons Dilemma

A situation in which individuals' short-term selfish interests conflict with long-term group benefits and sustainability, often related to resource use.

Reward Allocation Scheme

A system or principle used to determine how rewards, such as bonuses or recognition, are distributed among members of a group or organization.

Competition And Conflict

Competition and conflict involve rivalry between individuals or groups, where the objectives of one are perceived to be in opposition to those of the other, potentially leading to disputes or confrontations.

Egocentrism

A cognitive bias where individuals overemphasize their own perspective and cannot easily understand or assume the viewpoint of others.