PracticeSet2

# PracticeSet2 - Finance 261 Practice Set 2 Supplementary...

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Finance 261 Practice Set 2 – Supplementary Examples 1. Assume that an investor shorts 200 shares of stock at \$7.50 per share. At what price must the investor cover the short sale to realise a gross profit of \$500? 2. Consider the three stocks in the following table. P t represents price at time t in cents, and Q t represents the number of shares outstanding at time t. P o Q o P 1 Q 1 A B C 90 50 100 100 200 200 95 45 110 100 200 200 a. Calculate the rate of return on the following indexes of the three stocks for the period t = 0 to t = 1. i) a price weighted index. ii) a market value weighted index. b. Now assume that company A paid a dividend of 10 cents per share; company B paid a dividend of 6 cps. during the period and that a strategic shareholder holds 30% of company C’s shares. These shares are not available for sale. Calculate the rate of return on a gross value weighted index of the three stocks over the period t=0 to t=1 where the index is weighted by free float shares.

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## This note was uploaded on 10/17/2010 for the course FF f taught by Professor F during the Spring '10 term at Clayton.

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PracticeSet2 - Finance 261 Practice Set 2 Supplementary...

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