Suppose you have purchased some GameStop shares on margin at $5 per share. You ask your broker to put in a limit sell order at $7, and a 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 might you give to your broker to minimise your losses and lock in your gains?
Suppose you have purchased some GameStop shares on margin at $5 per share. You ask your broker to put in a limit sell order at $7, and a 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 might you give to your broker to minimise your losses and lock in your gains?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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all subparts please, i, ii and iii thank you
Transcribed Image Text:Suppose you have purchased some GameStop shares on margin at $5
per share. You ask your broker to put in a limit sell order at $7, and
a 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 might
you give to your broker to minimise your losses and lock in your
gains?
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