INVESTMENTS (LOOSELEAF) W/CONNECT
11th Edition
ISBN: 9781260465945
Author: Bodie
Publisher: MCG
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Chapter 3, Problem 2CP
Summary Introduction
To select: the amount received for each share when the price drop to $50 is to be determined where 100 share of stock sell at $55 while current price is $62.
Introduction : The selling of stock when the price falls below the stipulated level is called as stop-loss orders.
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If you place a stop-loss order to sell 100 shares of stock at $55 when the current price is $62, how much will you receive for each share if the price drops to $50? (Please provide your rationale, otherwise the quarter of the full score will be given.)
You own 200 shares of Shamrock Enterprises that you bought at $25 a share. The stock is now selling for $45 a share.a. You put in a stop loss order at $40. Discuss your reasoning for this action. b. If the stock eventually declines in price to $30 a share, what would be your rate of re-turn with and without the stop loss order?
If you place a stop-loss order to sell at $52 on a stock currently selling for$55.50 per share, what is likely to be the minimum loss you willexperience on 100 shares if the stock price rapidly declines to $49.50 pershare? Explain. What if you had placed a stop-limit order to sell at $52,and the stock price tumbled to $49.50?
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INVESTMENTS (LOOSELEAF) W/CONNECT
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Stock Split Suppose you own 2,000 common shares of Laurence Incorporated. The EPS is $10.00, the DPS is $3.00, and the stock sells for $80 per share. Laurence announces a 2-for-1 split. Immediately after the split, how many shares will you have, what will the adjusted EPS and DPS be, and what would you expect the stock price to be?arrow_forwardThe price of Outdoor Designs, Inc. is now 85. The company pays no dividends. Fred Gray expects the price four years from now to be 125 a share. Should Fred buy Outdoor Designs if he wants a 15 percent rate of return? Explain.arrow_forwardYou sell 100 shares of stock short for 40$ per share. You want to limit your loss on this transaction to no more than 500$. What order should you place?arrow_forward
- You sell 200 shares of a stock short for $63 per share. You want to limit your loss on this transaction to no more than $1,500. What order should you place?arrow_forwardYou purchased 200 shares of ABC common stock on margin at $50 per share. Assume the initial margin is 50% and the maintenance margin is 30%. You will get a margin call if the stock drops below what price? (Assume the stock pays no dividends and ignore interest on the margin loan.)arrow_forwardYou sold short 200 shares of Stock B at $25 per share. You have put additional $2,500 to meet the initial margin requirement. What is the margin of your account if the stock price rises to $26? Round your answer to two decimal places and enter it without dollar sign.arrow_forward
- You sold short 200 shares of META at $130 per share. You put up additional $13,000 to meet the 50% initial margin requirement. What is your margin if the stock price changes to $140? Enter your answer as a decimal, rounded to three decimal places.arrow_forwardSuppose you decide that the Bear Company stock is selling at too high a price at its current $50 per share price. You are convinced that the price of Bear stock will fall in the next couple of months, so you decide to sell 100 shares of Bear stock short. Ignoring transactions costs, if the Bear Company does not pay dividends, what is your profit or loss if the stock’s price goes to: $40 and you buy at that price to cover your short?arrow_forwardAssume you purchased 200 shares of GE common stock on margin at $70 per share from your broker. If the initial margin is 55%, how much did you borrow from the broker? Assume you sold short 100 shares of common stock at $40 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock price of $50?arrow_forward
- An investor sells a stock short for $97 a share. The company pays a $4.70 annual cash dividend. After a year has passed, the seller covers the short position at $85. If the margin requirement is 57 percent, what is the percentage return earned on the investment?Redo the calculations, assuming the price of the stock is $103 when the investor closes the position.Based on your calculations to both scenarios, what generalization can be inferred?arrow_forwardAn investor purchases 250 shares of ABC stock at $313 per share. The investor deposits the initial margin requirement of 45% and borrows the remaining amount at 6.25%. What is the maintenance margin excess or call if the maintenance margin requirement is 30% and the stock price drops to $303 per share? ANSWER IN TYPINGarrow_forwardYou purchased 1,000 shares of common stock on margin at R40 per share. Assume the initial margin is 50% and the stock pays no dividend. What would the maintenance margin be if a margin call is made at a stock price of R28? %?arrow_forward
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