Problem+Set+2

Problem+Set+2 - Problem Set 2 Chapter 3 8. Consider the...

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Problem Set 2 – Chapter 3 8. Consider the following limit order book of a specialist. The last trade in the stock occurred at a price of $50. Limit Buy Orders Limit Sell Orders Price Shares Price Shares 49.75 500 50.25 100 49.50 800 51.50 100 49.25 500 54.75 300 49.00 200 58.25 100 48.50 600 a. If a market buy order for 100 shares comes in, at which price will it be filled? b. At what price would the next market buy order be filled? c. If you were the specialist, would you want to increase or decrease your inventory of this stock? 11. Suppose that Intel currently is selling at $40 per share. You buy 500 shares using $15,000 of your own money, borrowing the reminder of your purchase price from your broker. The rate on the margin loan is %8. a. What is the percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to: (i) $44; (ii) $40; (iii) $36? What is the relationship between your percentage return and the percentage change in the price of Intel?
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This note was uploaded on 01/17/2012 for the course MGMT 141 taught by Professor Chernyshoff,n during the Fall '08 term at UC Irvine.

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Problem+Set+2 - Problem Set 2 Chapter 3 8. Consider the...

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