Chapter 3 Homework - Date/Time Name/ID EOC Problems...

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Date/Time: EOC Problems Assignment BADM411 Name/ID: Securities Markets Section:__ DL NSU 1 1. Suppose you short sell 100 shares of IBM, now selling at $ 120 per share. a. What is your maximum possible loss? b. What happens to the maximum loss if you simultaneously place a stop- buy order at $ 128? 2. DRK, Inc., has just sold 100,000 shares in an initial public offering. The underwriter’s explicit fees were $ 60,000. The offering price for the shares was $ 40, but immediately upon issue, the share price jumped to $ 44. a. What is your best guess as to the total cost to DRK of the equity issue? b. Is the entire cost of the underwriting a source of profit to the underwriters? 3. Dée Trader opens a brokerage account, and purchases 300 shares of Internet Dreams at $ 40 per share. She borrows $ 4,000 from her broker to help pay for the purchase. The interest rate on the loan is 8%. a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to $ 30 per share by the end of the year, what is the remaining margin in
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