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IPM_Homework #1 - BUS 415 Investment and Portfolio...

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BUS 415: Investment and Portfolio Management AUBG Spring 2010 Homework #1 Problem 1 The stock of Shamrock Corporation is selling at $28 a share. You place a market order to buy 100 shares of Shamrock. Immediately after your market order is executed, you place a stop- loss limit order for 100 shares at $24 and a stop-buy limit order for 100 shares at $32. During the next three months, the stock price gradually declines to $20 and then slowly rises to $36. What is your net gain/loss and the rate of return on this investment? Ignore transaction costs and brokerage commissions. 1
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Problem 2 You believe that Krispy Kreme Doughnuts, currently trading at $40 per share, is one of the  most undervalued companies in the market. To take advantage of what you believe is a sure  increase in the stock price you decide to buy as many shares as possible using a margin  position. You place $10,000 in your margin account to open the position. The initial margin  requirement is 50%. 
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