Q1. What are the advantages and disadvantages of exchange-traded funds versus mutual funds?
Q2. What are some differences between hedge funds and mutual funds?
Q3. Would you expect a typical open-end fixed-income mutual fund to have higher or lower operating expenses than a fixed-income unit investment trust? Why?
Q4. Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams from the previous question. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $40 to $50, and the stock has paid a dividend of $2 per share.
a. What is the remaining margin in the account?
b. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?
c. What is the rate of return on the investment?