One hour ago, Mr. Jones placed a stop sell order to sell 50,000 shares of XYZ stock
Question:
One hour ago, Mr. Jones placed a stop sell order to sell 50,000 shares of XYZ stock at the price of $12.20 when the last executed price was $12.50.
Now, the last executed price falls to $12.20. The bid and offer orders of XYZ stock are shown in the table below.
| Bid (shares) | Offer(shares) | |
| $12.5 | 8,000 | |
| $12.4 | 23,000 | |
| $12.3 | 17,000 | |
| 20,000 | $12.2 | |
| 18,000 | $12.1 | |
| 45,000 | $12.0 | |
⦁ Based on the table above, at what price(s) and how many shares will be sold in Mr. Jones’ order? Explain your answer.
⦁ What is the possible reason that Mr. Jones did not sell the stock at around $12.50 but instead placed the stop sell order to sell at a lower price of $12.20?
⦁ An index is composed of 5 stocks (A, B, C, D and E). The stock prices of the 5 stocks on day 1 and day 2 are shown below. Suppose the index level on day 1 is 12,356. Calculate the index level on day 2 using price weighted method. (4 marks)
| Stock | Price per share $ | Number of free-float shares (million) |
| Day1 Day2 | ||
| A | $36.36 $35.97 | 163 |
| B | $48.36 $47.71 | 88 |
| C | $48.44 $47.98 | 42 |
| D | $34.35 $33.42 | 43 |
| E | $74.32 $72.53 | 68 |
⦁ David is not holding any investment at this moment. The stock price of XYZ stock is currently $28 per share. He is very confident that the stock price of XYZ stock will fall very soon. How can David make some profit in this situation? Explain your answer.
⦁ Further to the previous question, what does David have to do before he places his order?
⦁ Suppose after executing David’s strategy at $28 per share in part D the stock price rises to $32 per share. Calculate the profit/loss per share in dollar amount.
Expert Answer:
Answer Based on the table above Mr Jones will sell 50000 shares of XYZ stock at a price of 122 This is because the bid and offer orders of XYZ stock s... View the full answer
