1. Assume that you short-sell 50 shares of a stock at a price of $100 a share, putting up $4,000 cash and borrowing $1,000 at an interest rate of 5%. If, after one year, the price fell to $70 and a dividend of $5/share was paid, what would be your return on investment?
2. Assume a 20 year, 9% coupon, $1,000 face value bond paying semiannual coupons is callable in 10 years at a call price of $1,250. If the bond sells at a current yield to maturity of 11%, what is the yield to call?