Tom started to feel more comfortable trading stocks and wanted to navigate more trading strategies. He started to hear about short selling. Tom still does not fully understand how it works but he knows it is a way to make money when you are bearish about a certain stock. Tom is not into social media and strongly believes that social media stocks are significantly overvalued. His advisor tried to convince him not to let his personal preference determine his investment strategies, but Tom said, "I tried it once with GRMT and it worked, I know it will work again!!". So, he decided to invest part of his money to short-sell the new social media company Eye City (EC). Tom sold 40,000 shares of EC short at a price of $28 on December 30th of 2021(The broker has a 50% margin requirement on short selling). He also decided that The remaining amount of the money will be invested in the money market "Municipal bonds". He purchased bonds issued by the state of Texas that have a yield of 7%. 9) How much will be invested in the Municipal bonds? a) $800,000 b) $1,120,000 c) $880,000 d) $560,000 e) $780,000
Tom started to feel more comfortable trading stocks and wanted to navigate more trading strategies. He started to hear about short selling. Tom still does not fully understand how it works but he knows it is a way to make money when you are bearish about a certain stock. Tom is not into social media and strongly believes that social media stocks are significantly overvalued. His advisor tried to convince him not to let his personal preference determine his investment strategies, but Tom said, "I tried it once with GRMT and it worked, I know it will work again!!". So, he decided to invest part of his money to short-sell the new social media company Eye City (EC). Tom sold 40,000 shares of EC short at a price of $28 on December 30th of 2021(The broker has a 50% margin requirement on short selling). He also decided that The remaining amount of the money will be invested in the money market "Municipal bonds". He purchased bonds issued by the state of Texas that have a yield of 7%. 9) How much will be invested in the Municipal bonds? a) $800,000 b) $1,120,000 c) $880,000 d) $560,000 e) $780,000
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
Related questions
Question
am. 125.
Transcribed Image Text:Tom started to feel more comfortable trading stocks and wanted to navigate more trading
strategies. He started to hear about short selling. Tom still does not fully understand how
it works but he knows it is a way to make money when you are bearish about a certain
stock. Tom is not into social media and strongly believes that social media stocks are
significantly overvalued. His advisor tried to convince him not to let his personal
preference determine his investment strategies, but Tom said, "I tried it once with GRMT
and it worked, I know it will work again!!". So, he decided to invest part of his money
to short-sell the new social media company Eye City (EC). Tom sold 40,000 shares of EC
short at a price of $28 on December 30th of 2021(The broker has a 50% margin
requirement on short selling). He also decided that The remaining amount of the
money will be invested in the money market "Municipal bonds". He purchased bonds
issued by the state of Texas that have a yield of 7%.
9) How much will be invested in the Municipal bonds?
a) $800,000
b) $1,120,000
c) $880,000
d) $560,000
e) $780,000
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