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Attached is a document containing investment questions tht I need assistance to complete. 1. Imagine that Mini-Dow Average (MDA) is based on the closing prices
Attached is a document containing investment questions tht I need assistance to complete.
1. Imagine that Mini-Dow Average (MDA) is based on the closing prices of five stocks. The divisor used in the calculation of the MDA is currently 0.765. The closing prices for each of the five stocks in the MDA today and exactly one year ago, when the divisor was 0.780, are given in the accompanying table. a. Calculate the MDA today and that of a year ago b. Compare the values of he MDA calculated in part (a) and describe the apparent market behavior over the last year. Was it a bull or a bear market? Stock Ace Computers Coburn Motor Company National Soap & Cosmetics Ronto Foods Wings Aircraft Today $74 $39 $112 1 year Ago $65 $34 $95 $71 $97 $72 $88 2. Deepa Chungi wishes to develop an average, or index, that can be used to measure the general behavior of stock prices over time. She has decided toinclude six closely followed, high-quality stocks in the average or index. She plans to use August 15, 1987 , her birthday, as the base and is interested in measuring the value of the average or index on August 15, 2013, and August 15, 2016. She has found the closing prices for each of the six stocks, A through F, at each of the three dates and has calculated a divisor that can be used to adjust for any stock splits, company changes, and so on that occurred since the base year, which has divisor equal to 1.00. a. Using the data given in the table, calculate the market average, using the same methodology used t calculate the Dow averages, at each of the dates - August 15, 1987, 2013, and 2016. b. Using the data given in the table and assuming a base index value of 10 on August 15, 1987, calculate the market index, using the same methodology used to calculate the S&P indexes, at each of the dates. Closing Stock Prices Stock August 15, 2016 August 15, 2013 August 15, 1987 A $46 $40 $50 B $37 $36 $10 C $20 $23 $7 D $59 $61 $26 E $82 $70 $45 F $32 $30 $22 Divisor 0.70 0.72 1.00 Note: The number of shares of each stock outstanding has been the same on these dates. Therefore, the closing stock prices will behave identically to the closing market values. c. Use your findings in parts (a) and (b) to describe the general market condition - bull or bear - that existed between August 15, 2013 and August 15, 2016. d. Calculate the percentage changes in the average and index values between August 15, 2013 and August 15, 2016. Why do they differ? 3. You sell 200 shares of stock short for $60 per share. You want to limit your loss on this transaction to no more than $1,400. What order should you place? 4. You own 500 shares of Ups&Downs, Inc., stock. It is currently priced 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 accountStep by Step Solution
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