QUE
(a) Al Cromwell places a market order to buy around lot of Thomas, Inc., common stock, which is traded on theNYSE and is currently quoted at $50 per share. Ignoring brokeragecommissions, determine how much money will Cromwell probably haveto pay. If he had placed a market order to sell, how much moneywill he probably receive? Explain.
(b) Imagine that you have placed a limit orderto 100 shares of Sallisaw Tool at a price of $38, although thestock is currently selling for $41. Discuss the consequences, ifany, of each of the following situations.
(i) The stock price drops to $39 per share two months beforecancellation of the limit order.
(ii) The stock price drops to $38 per share
(iii) The minimum stock price achieved before cancellation ofthe limit order was $38.50. When the limit order was cancelled, thestock was selling for $47.50 per share.
(c) You have been researching a stock that youlike, which is currently trading at $50 per share. You would liketo buy the stock if it were a little less expensive âsay, $47 pershare.
You believe that the stock price will go to $d70 by year andthen level off or decline. You decide to place a limit order to buy100 shares of the stock at $47 and a limit order to sell it at $70.It turns out that you were right about the direction of the stockprice, and it goes straight to $75. What is your currentposition?
(d) You own 500 shares of Ups &Downs, Inc.,stock. It is currently price at $50. You are going on vacation, andyou realize that the company will be reporting earnings while youare away. To protect yourself against a rapid drop in the price,you place a stop-limit order to sell 500 shares at $40. It turnsout the earnings report was not so good, and the stock price fellto $30 right after the announcement. It did, however, bounce back,and by the end of the day it was back to $42. What happened in youraccount?
