# Suppose you sell short 100 shares of IBM currently selling at \$120/share. What is your maximum possible loss? What is your maximum loss if you place a stop- buy order at \$128/share?

Suppose you sell short 100 shares of IBM currently selling at \$120/share. What is your maximum possible loss? What is your maximum loss if you place a stop- buy order at \$128/share?.

1.Suppose you sell short 100 shares of IBM currently selling at \$120/share. What

is your maximum possible loss? What is your maximum loss if you place a stop-

2. Suppose that British Petroleum (BP) is selling at \$20 per share. You buy 1,000

shares using \$15,000 of your own money and borrow the remaining amount on

margin from your brokerage company. The broker’s margin rate is 8%.

a) What is the percent increase in the net worth of your brokerage account if

the price of BP immediately changes to (i) \$22; (ii) \$20; (iii) \$18?

b) Assume a year has passed. If the maintenance margin in 25%, how low

can BP’s price fall before you get a margin call from your broker?

c) It’s now a year later. Wat is the percent increase in the net worth of your

brokerage account if the price of BP changes to (i) \$22; (ii) \$20; (iii) \$18?

3. If you place a stop order to sell 100 shares of stock at \$55 when the current price

is \$62, how much will you receive for each share if the price drops to \$50? (a)

\$50 (b) \$55 (c) \$54.87 (d) can’t tell from the information given

Suppose you sell short 100 shares of IBM currently selling at \$120/share. What is your maximum possible loss? What is your maximum loss if you place a stop- buy order at \$128/share?

Posted in Uncategorized