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In: Finance
FINANCE MR. Smith buys 100 shares of XYZ stock with cash. His brokerage firm charges a...
FINANCE
MR. Smith buys 100 shares of XYZ stock with cash. His brokerage firm charges a commission of $10 per transaction. Mr. Jones also purchases 100 shares of XYZ stock. He borrows the amount needed to complete the purchase from a bank. The bank charges interest at the continuous risk-free rate of 4% (annually). Mr. Jones' brokerage firm charges a commission of 1% of each transaction amount. The current price of one share of XYZ stock is 18.94. Calculate the profit for both Mr. Smith and Mr.Jones assuming that they both sell all of their shares after 3 months (assume that Mr.Jones must use the proceeds of the stock sale to repay the bank loan). The price of one share of XYZ stock at the end of 3 months is 23.15.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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Most Recent Price Change
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0
-1/8
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.4
.3
-1/8
.2
.1
.7
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A stock trader at a brokerage firm has noticed that price changes in the shares of...
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are dependent upon the previous trade's price change. Her
observations can be summarized by the following transition matrix.
(We are assuming +1/8, 0, -1/8 are the only possible price changes
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Next Price Change
Most Recent Price Change
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0
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.7
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0
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