Questions from General Investment

Q: Suppose you purchase 500 shares of stock at $48 per share

Suppose you purchase 500 shares of stock at $48 per share with an initial cash investment of $8,000. If your broker requires a 30 percent maintenance margin, at what share price will you be subject to...

Q: Suppose the call money rate is 4.5 percent, and

Suppose the call money rate is 4.5 percent, and you pay a spread of 2.5 percent over that. You buy 800 shares of stock at $34 per share. You put up $15,000. One year later, the stock is selling for $4...

Q: Given your answer to the last question and the discussion in the

Given your answer to the last question and the discussion in the chapter, why would any rational person do anything other than load up on 100 percent small stocks?

Q: You are given the returns for the following three stocks:

You are given the returns for the following three stocks: Calculate the arithmetic return, geometric return, and standard deviation for each stock. Do you notice anything about the relationship be...

Q: The 1980s were a good decade for investors in S&P

The 1980s were a good decade for investors in S&P 500 stocks. To find out how good, construct a spreadsheet that calculates the arithmetic average return, variance, and standard deviation for the S&P...

Q: Looking back at Problem 12, suppose the call money rate is

Looking back at Problem 12, suppose the call money rate is 5 percent and your broker charges you a spread of 1.25 percent over this rate. You hold the stock for six months and sell at a price of $65 p...

Q: If you wanted to purchase the right to sell 2,000

If you wanted to purchase the right to sell 2,000 shares of JC Penney stock in November 2015 at a strike price of $9 per share, how much would this cost you?

Q: Which put contract sells for the lowest price? Which one sells

Which put contract sells for the lowest price? Which one sells for the highest price? Explain why these respective options trade at such extreme prices.

Q: You just sold short 750 shares of Wetscope, Inc., a

You just sold short 750 shares of Wetscope, Inc., a fledgling software firm, at $96 per share. You cover your short when the price hits $86.50 per share one year later. If the company paid $0.75 per s...

Q: You believe the stock in Freeze Frame Co. is going to

You believe the stock in Freeze Frame Co. is going to fall, so you short 600 shares at a price of $72. The initial margin is 50 percent. Construct the equity balance sheet for the original trade. Now...