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Suppose that Tesla stock is currently selling at $270 per share. For each of the following situations (ignoring brokerage commissions), calculate the gain or loss that Olivia Crowe realizes if she makes a 100-share transaction.
- She sells short and repurchases the borrowed shares at $295 per share.
- She takes a long position and sells the stock at $295 per share.
- She sells short and repurchases the borrowed shares at $255 per share.
- She takes a long position and sells the stock at $255 per share.
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- Given that Local Care, Inc.'s stock is currently selling for $65 a share, calculate the amount of money that Elijah Pearson will make (or lose) on each of the following transactions. Assume that all transactions involve 100 shares of stock, and ignore brokerage commissions. Input all answers as positive values. He short-sells the stock and then repurchases the borrowed shares at $85.Total of $ . He buys the stock and then sells it some time later at $85.Total of $ . He short-sells the stock and then repurchases the borrowed shares at $50.Total of $ .Lauren has a margin account and deposits $49,994 into it. Assume the prevailing margin requirement is 40%, interest and commisions are ignored, and the Gentry Wine Corporation is selling at $35 per share. a) How many shares can Lauren purchase using the maximum allowable margin? b) What is Lauren's profit (loss) if the price of Gentry's stock 1) rises to $45 and Lauren sells the stock? 2) falls to $25 and Lauren sells the stock? c) If the maintenance margin is 30% to what price can Gentry Wine fall before Lauren will receive a margin call?David, a trader, wants to buy 1,000 shares of XYZ stock, while a second trader, Alexis, is willing to sell 1,500 shares of the same stock. Unfortunately, David and Alexis don’t know one another and must complete their transactions using the stock exchange’s market-making dealer. XYZ’s market maker is willing to sell her shares for $32.70 per share and purchase additional shares for $31.25 per share. Select the most appropriate values in the following table: Term Value Bid price Ask price Bid-ask spread If the market maker is willing to purchase the entire block of 1,500 shares from Alexis and, from that block, resell 1,000 shares to David, then the market maker’s net profit from David’s transaction—excluding any inventory effects—will be .
- After researching Best Buy common stock, Sally Wang is convinced the stock is overpriced. She contacts her account executive and arranges to sell short 400 shares of Best Buy. At the time of the sale, a share of common stock had a value of $160. Three months later, Best Buy is selling for $152 a share, and Sally instructs her broker to cover her short transaction. Total commissions to buy and sell the stock were $64. What is her profit for this short transaction?Assume that an investor short-sells 600 shares of stock at a price of $45 a share, making a 50 percent margin deposit. A year later, she repurchases the borrowed shares at $30 a share. How much of her money did the short-seller have to put up to make this transaction?$ How much money did the investor make, or lose, on this transaction? Ignore margin interest.$ What rate of return did she make on her invested capital (see part a)? Ignore margin interest. Round the answer to two decimal places. %Suppose Tyler initially pays $76,000 toward the purchase of $108,000 worth of stock, borrowing the remaining balance from one of notorious brokers, Diego. In this case, Tyler’s initial percentage margin is closest to A. 70.37%. B. 60.50%. C. 39.50%. D. 29.63%. Clear my choice
- At the beginning of 2007, an investor buys 2 shares at $100 each. At the beginning of 2008, he buys another 3 shares at $120 each. At the beginning of 2009, he sells 1 share at $110 each. At the beginning of 2010, he sells the remaining 4 shares at $130 each. The stock does not pay any dividend. Calculate the dollar-weighted rate of return.Suppose Formura’s stock is currently trading at $50 per share, but Lorenzo believes that the stock is overpriced. In response to this, he calls his broker to take a short position on 300 shares of Formura’s stock. Over the next three months, the price of Formura’s stock decreased, and Lorenzo placed an order to purchase 300 shares to offset his short position. If the price decreased to $45, then Lorenzo stands to earn $______ from his short position. -$3,000 $3,000 -$1,500 $1,500a) Jessie B. purchases 450 shares of Smooth Sail Inc. for $50 per share at a time when the initial marginrequirement is 60%. After two months, seeing that the price of Smooth Sail has fallen to $40 per share,Jessie wishes to buy an additional 200 shares. By this time, the initial margin requirement has gonedown to 50%. Will Jessie be able to do some pyramiding? What is the amount of margin he will berequired to provide for his second transaction? Support your answer with relevant calculations.
- Lauren short sells 100 shares of XYZ at $52 with a 50% initial margin. She then bays back the stock for $48. If her broker charges 2% of the borrowed amount, what is her percentage profit or loss?You have decided to retire and want to sell your shares in a closely held, all equity firm. The other shareholders have agreed to have the firm borrow $954,200 to purchase your 6,500 shares of stock at the current market value. The total number of shares outstanding is 30,000. What will be the new price per share after the repurchase?Lahhey Publishing wishes to estimate the value of its outstanding preferred stock. The preferred stock has a RM50 par value and pays an annual dividend of RM7.50 per share and currently earning an 8% annual rate of return. (i) Calculate the market value of the outstanding preferred stock. (ii) If an investor purchases the preferred stock at the value calculated in part (a), how much does she gain or lose per share if she sells the stock when the required return on preferred stock has fallen to 6%. Explain.
