Investments
Investments
11th Edition
ISBN: 9781259277177
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Chapter 3, Problem 8PS
Summary Introduction

(A)

Adequate information

    Limit Buy orders Limit Sell orders
    Price Shares Price Shares
    $49.75 500 $49.80 100
    49.70 900 49.85 100
    49.65 700 49.90 300
    49.60 400 49.95 100
    48.65 600

To determine:

The price at which the 100 shares of market buy order can be filled

Introduction:

Market order refers to the instruction provided by the investor to its broker to purchase or sell a particular stock at the price currently prevailing in the market. Market order can only be accepted by the broker when trading underlying a specific stock is active or during the market hours.

Summary Introduction

(B)

To determine:

The price at which the 100 shares of next market buy order can be filled

Introduction:

Market order refers to the instruction provided by the investor to its broker to purchase or sell a particular stock at the price currently prevailing in the market. Market order can only be accepted by the broker when trading underlying a specific stock is active or during the market hours.

Summary Introduction

(C)

To determine:

Whether the security dealer should be decrease or increase the inventory through the stock

Introduction:

Limit order refers to the instruction provided by an investor to a broker that includes a particular price at which the investor wants to purchase or sell a specific stock. Limit order enables the investor to select minimum price for the sell orders and maximum price for the buy order.

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Students have asked these similar questions
An investor purchases a stock for $38 and a put for $.50 with a strike price of $35. The investor sells a call for $.50 with a strike price of $40. What is the maximum profit and loss for this position? Draw the profit and loss diagram for this strategy as a function of the stock price at expiration.
An investor tells their broker to short 1,000 shares of a stock that is currently priced at $50. Is the investor betting that the price will go up or down in this scenario? Where do the shares for a short sale come from?
What about for these? (b) Suppose you have purchased some GameStop shares on margin at $5per share. You ask your broker to put in a limit sell order at $7, anda stop loss order at $4.50.i. What will happen if the stock price falls to $4.50?ii. What will happen if the stock price rises to $7?iii. Now suppose you had instead short-sold your GameStop shares(as in the first part of the question). What instructions mightyou give to your broker to minimise your losses and lock in yourgains?
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