Question

QUE

(a) Al Cromwell places a market order to buy a round lot of Thomas, Inc., common stock, which is traded on the NYSE and is currently quoted at $50 per share. Ignoring brokerage commissions, determine how much money will Cromwell probably have to pay. If he had placed a market order to sell, how much money will he probably receive? Explain.

(b) Imagine that you have placed a limit order to 100 shares of Sallisaw Tool at a price of $38, although the stock is currently selling for $41. Discuss the consequences, if any, of each of the following situations.

(i) The stock price drops to $39 per share two months before cancellation of the limit order.

(ii) The stock price drops to $38 per share

(iii) The minimum stock price achieved before cancellation of the limit order was $38.50. When the limit order was cancelled, the stock was selling for $47.50 per share.

(c) You have been researching a stock that you like, which is currently trading at $50 per share. You would like to buy the stock if it were a little less expensive –say, $47 per share.

You believe that the stock price will go to $d70 by year and then level off or decline. You decide to place a limit order to buy 100 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 stock price, and it goes straight to $75. What is your current position?

(d) You own 500 shares of Ups &Downs, Inc., stock. It is currently price at $50. You are going on vacation, and you realize that the company will be reporting earnings while you are away. To protect yourself against a rapid drop in the price, you place a stop-limit order to sell 500 shares at $40. It turns out the earnings report was not so good, and the stock price fell to $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 your account?

Answer 1

Question a:

Answer: Here we have to identify how many shares are present in a round lot. A round lot has a minimum number of 100 shares and can go in multiples of 100.

Since we are taking of "a" round lot, this should be 100 shares

So, when Cormwell places an order to buy a round lot for Thomas Inc shares at $50, he has to pay $50*100 = $5,000

Similarly, if Cromwell places an order to sell a round lot of Thomas Inc shares at $50, he will probably receive $10,*100 = $5,000

Note: We have answered one full question. Only one full question can be answered at a time. Please post the other question separately for experts to answer