Chapter 3 Question

Chapter 3 Question - c) Execution uncertainty but not price...

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Chapter 3 Question 1) Call full-service broker and one discount broker and find out the transactions costs of implementing the following strategies: a) Buying 100 shares of IBM now and selling them 6 months from now. b) Investing an equivalent amount in 6-month at0the0money call options on IBM stock now and selling them 6 months from now. 2) Who sets the bid and asked price for a stock treaded over the counter? Would you expect the spread to be higher on actively or inactively traded stock? 3) A market order has: a) Price uncertainty but not execution uncertainty b) Both price uncertainty and execution uncertainty
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Unformatted text preview: c) Execution uncertainty but not price uncertainty 4) Dee 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 Dee account when she first purchase the stock? b) If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 30%, will she receive a margin call? c) What is the rate of return on her investment?...
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