Suppose you buy a stock currently trading at $10. What kind of additional trade might you place to make sure that your losses do not exceed $5? (Assume no dividends and no broker fees.)
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Suppose you buy a stock currently trading at $10. What kind of additional trade might you place to make sure that your losses do not exceed $5? (Assume no dividends and no broker fees.)
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- Please help answer this question.Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account.a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Xtel pays no dividends.b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call?c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.The common stock of the C.A.L.L. Corporation has been trading in a narrow range around $105 per share for months, and you believe it is going to stay in that range for the next 3 months. The price of a 3-month put option with an exercise price of $105 is $12.86. a. If the risk-free interest rate is 5% per year, what must be the price of a 3-month call option on C.A.L.L. stock at an exercise price of $105 if it is at the money? (The stock pays no dividends.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Price of a 3-month call option
- 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?Suppose instead of paying a dividend, Payout Corp. announces that it will repurchase stockwith a market value of $10,000. What happens to the stock price when the repurchaseproposal is announced? subpart d needs to be solved.Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account. a.If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Xtel pays no dividends. b.If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? c.Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.13.
- The term short selling is the O Selling of a security that was purchased by borrowing money from a broker O Selling of a security that is not owned by the seller. O Selling of all the shares -you own in a company in anticipation that the price will decline dramatically O Betting that a stock will increase by a certain amount within a given period of time.Suppose that investors cumulatively short-sell 6 million shares of a stock and the share price appreciates from $200 to $1100. In the meantime, the stock pays a dividend of $20 per share. What is the total amount of loss that the short sellers suffer from their position? You can ignore shorting fees and assume all interest rates are zero). A. $5.5 billion B. $7.3 billion C. $6.1 billion O D. $4.3 billionA stock is currently selling for $60 a share. What is the percentage gain or loss on the followingtransactions? Identify if it is a gain or loss.a. You take a long position and the stock’s price declines to $50. b. You sell the stock short and the price increases to $70.
- Which one of the following is an example of mental accounting? Multiple Choice O associating a security's gains or losses based on its purchase price calculating the gain or loss on a security on a daily basis O computing the amount of tax due on the gain from a stock sale considering the gain realized when a stock pays a dividend comparing the gains and losses on a portfolio to those of the overall marketBoth a call and a put currently are traded on stock XYZ; both have strike prices of $40 and expirations of 6 months. a. What will be the profit to an investor who buys the call for $5 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 1 decimal place.) Stock Price i. $ ii. $ iii. $ iv. $ $ V. 8 GS G 4 40 45 50 55 60 ProfitA stock is currently selling for $30.00 a share. What is the gain or loss on the following transactions? Use a minus sign to enter the amount as a negative value. Round your answers to the nearest cent. You take a long position and the stock’s price declines to $16.85. $ You sell the stock short and the price declines to $16.85. $ You take a long position and the price rises to $43.65. $ You sell the stock short and the price rises to $43.65.