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# hw2sol - Investment Analysis(FIN 383 Fall 2010 Homework 2...

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Investment Analysis (FIN 383) Fall 2010 Homework 2 Instructions: please read carefully You should show your work how to get the answer for each calculation question to get full credit The due date is Tue, Sep 28, 2010. Late homework will not be graded. Name(s): Student ID

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Chapter 3 1. Market orders are buy or sell order that will be executed immediately at _______________ prices a. the best b. current market c. the highest d. the lowest 1. b 2. Trading of exiting stock take place in the _______________. a. secondary market b. third market c. forth market d. All of the above. 2. a 3. You purchased 100 shares of AAA common stock on margin for \$40 per share. The initial margin is 60% and the stock pays no dividend. Your rate of return would be _______________ if you sell the stock at \$43 per share 3.d Intial position Stock 4000 Borrowed 1600 Equity 2400 When stock price is 43, the position is Stock 4300 Borrowed 1600 Equity 2700 Return = (2700 – 2400)/ 2400 = 12.5% 4. The _______________ price is the price a dealer is willing to purchase a security. 4. a 5. You purchased ABC stock at \$50 per share. The stock is currently selling at \$49. Your potential loss could be reduced by placing a _______________. 5. d