博迪_投资学第九版_英文答案(12)

博迪_投资学第九版_英文答案

PROBLEM SETS

1. Answers to this problem will vary.

2. The dealer sets the bid and asked price. Spreads should be higher on inactively traded

stocks and lower on actively traded stocks.

3. a. In principle, potential losses are unbounded, growing directly with increases

in the price of IBM.

b. If the stop-buy order can be filled at $128, the maximum possible loss per

share is $8, or $800 total. If the price of IBM shares goes above $128, then

the stop-buy order would be executed, limiting the losses from the short sale.

4. (a) A market order is an order to execute the trade immediately at the best

possible price. The emphasis in a market order is the speed of execution (the

reduction of execution uncertainty). The disadvantage of a market order is that

the price it will be executed at is not known ahead of time; it thus has price

uncertainty.

5. (a) The advantage of an Electronic Crossing Network (ECN) is that it can execute

large block orders without affecting the public quote. Since this security is

illiquid, large block orders are less likely to occur and thus it would not likely

trade through an ECN.

Electronic Limit-Order Markets (ELOM) transact securities with high trading

volume. This illiquid security is unlikely to be traded on an ELOM.

6. a. The stock is purchased for: 300 × $40 = $12,000

The amount borrowed is $4,000. Therefore, the investor put up equity, or

margin, of $8,000.

CHAPTER 3: HOW SECURITIES ARE TRADED