If you place a stop-loss order to sell 500shares of Nedbank at R130 when thecurrent price is R135, how much will youreceive for each share if the price drops toR127?a.Close to R127○ b. Close to R130○ c. Close to R135d. Won't sell because the price is toolow

A stop-loss order is a type of order placed with a broker to sell a security (such as a stock or…

Answered: If you place a stop-loss order to sell…

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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B. The current market price for ABC is $70 per share. Initialmargin is 50%, maintenance margin is 35% and there is no margininterest. B.1) You believe the stock price will decrease over the nextyear and wish to trade exactly one round lot. What trade should youmake ? How much margin would you have to post to youraccount ? At what price would you receive a margin call? B.2) Suppose you are correct and the stock falls to $64 pershare at the end of the year. What is your percentage return onequity for this trade ?
H5. In two different markets, you see the following prices. Market #1: 20 Call = 5.50, 20 Put = 3.50, Underlying = 22 Market #2: 110 Put = 9.50, 115 Put = 2.50, Underlying = 110 You can trade in either market, but not both. Please describe: What trades will you do to lock in the highest amount of profit? How much profit (to one decimal place)?
6. Assume you own Apple stock. The current price is $100. Assume a strike of $110 and expiration of 3 months. The premium is $4 for a call. Assume you use a covered call. What is the maximum profit you can make? Now assume you use a protective put with a premium of $6 and strike of $108 and the price falls to $90. What is the profit/loss?
Do solve all three parts Suppose that your company wants to raise additional money via a right offering. Currently, the value of the company is $10,000,000 and the price per share is $100. The company wants to raise $1,000,000. (a) Suppose that your company wants to avoid a large drop in price after the rights offering. In particular, it wants the ex-rights price to be $95. What should be the subscription price? How many additional shares should the company issue? (b) Compute the value of the right. How many rights are required to buy one share? (c) Suppose now that the firm decides to hire an investment bank as an underwriter to facilitate the process. Suppose that the underwriter charges a 2% fee for each dollar raised in the rights offering. Redo part (a), assuming that the ex-rights price is still $95. How does your answer change if, on top of the 2% fee, the underwriter requires a fixed payment of $10,000?
You purchase 500 shares of Compucon for $120 per share using a margin account. This transaction requires a 45% percent margin. a. What is the initial margin position? b. Assume the price of Compucon declines to $90 per share. If the minimum maintenance margin requirement is 25% will you receive a margin call? Why? Why not? Explain. c. What is your rate of return? d. Calculate the price that will trigger a margin call.
d. What is the rate of return on your margined position (assuming again that you invest $15,000 of your own money) if Xtel is selling after 1 year at: (i) $83.62; (ii) $74; (iii) $64.38? What is the relationship between your percentage return and the percentage change in the price of Xtel? Assume that Xtel pays no dividends. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) Rate of return for ear. i.) ? ii.) ? iii.) -22.51
You purchase a call with a strike of K-22 at a premium of 1.73 and you purchase a put with a strike of K-22 at a premium of 2.13. At maturity, the underlying is worth 15.31. What is your profit (or loss)? {Enter your answer in dollars with 2 decimals, but do not use the "$". Enter a loss with a negative sign. For example, if the profit/loss is -123.45, enter-123.45 with the negative sign for your answer. }
Given the following data and assume the margin listed, what will your return on the investment be on this short sale (assume it is a margin transaction)? Shares Price Margin New Price O 50% 5500 O-33% O 75% O -50% $40 50% O None of these are correct $25
You buy a Westinghouse call with an exercise price of P20 paying P2.50. If Westinghouse stock closes at P24.75 on the expiration date of the call, your rate of return is what percentage?
The call has a premium of $10 and a strike price of $60. You decide to go on margin, meaning that you put down $8 of your own money and borrow the other $2. On the day of expiration, the underlying asset is worth $75. What is your percentage return on equity for this position?
(J) An item is originally priced to sell for $80 and is marked down 20%. A customer has a coupon for an additional 25%. What is the total percent reduction and the final selling price? The total percent reduction is___% The final selling price is___$
No Excel You open a new margin account with an initial margin requirement of 65% and a maintenance margin requirement of 45%. You purchase stock for $24,512, borrowing to the full extent allowable. Assuming there are no dividends or interest paid to or from the margin account, at what price could you first receive a margin call?

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If you place a stop-loss order to sell 500 shares of Nedbank at R130 when the current price is R135, how much will you receive for each share if the price drops to R127? ○ a. Close to R127 O b. Close to R130 O c. Close to R135 d. Won't sell because the price is too low