Risk Tolerance As we discussed in the chapter, risk tolerance is based on an individual's personality and investment goals. There are numerous risk tolerance questionnaires on the Web. One, provided by Merrill Lynch, is located at individual.ml.com. Go to the Web site, locate the questionnaire, and take the quiz. How conservative or aggressive are you?
Short Interest You can find the number of short sales on a particular stock at finance. yahoo.com. Go to the site and find the number of shares short sold for ExxonMobil (XOM) under the "Profile" link. How many shares are sold short in the current month? What about the previous month? What do the "Percent of Float" and "Short Ratio" mean?
Broker Call Money Rate What is the current broker call money rate? To find out, go to www.money-rates.com and look up "Key Interest Rates."
Margin Purchases Suppose you have a margin account with TDWaterhouse. You purchase 1,000 shares of IBM stock on 50 percent margin at today's price. Go to finance.yahoo.com to find your purchase price. Ignoring transaction costs, how much will you borrow? Next, go to www.money-rates.com to find the current broker call money rate. Finally, go to www.tdwaterhouse.com to find out how much above the current broker call money rate you will pay. Hint: Do a search for "margin rates" on this site. If you keep your investment for one year, how much will you pay in interest assuming the margin rate stays the same? What does the stock price have to be in one year for you to break even on your investment?
