## Question

# A hedge fund wants to purchase 100 shares of company X. The bid = $70, offer = $80. They also want to purchase 200 shares

A hedge fund wants to purchase 100 shares of company X. The bid = $70, offer = $80. They also want to purchase 200 shares of company Y. The bid = $15, offer = $25.

1). What is the proportional bidâ€“offer spread of each company?

2). What is the midmarket total value of each position?

3). What is the cost to the hedge fund to unwind the portfolio?

4). If the bidâ€“offer spreads are normally distributed with mean $10 and standard deviation $3,

what is the 99% worst-case cost of unwinding the position in the future?

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Proportional bid ask spread of company X and Y 1333 ...### Get Instant Access to Expert-Tailored Solutions

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### Foundations of Finance The Logic and Practice of Financial Management

**Authors:** Arthur J. Keown, John D. Martin, J. William Petty

8th edition

132994879, 978-0132994873

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