Suppose that a bank has bought 14 million Gamestop shares and 42 million ounces of silver. Gamestock shares have bid price $99.5 and offer price $100.5. Silver has bid price $19.5 and offer price $20.5.

Assume now the market is in stressed conditions. The mean and standard deviation for the Gamestop shares bid-offer spread is $1.0 and $2.5, respectively.The mean and standard deviation for the silver bid-offer spread is $1.0 and $1.5, respectively.

a)What are the mean and standard deviation of the proportional bid-offer spread for both Gamestop shares and silver?

b)Assume the spreads are normally distributed, what is the cost of liquidation that will not be exceeded with 95% probability (use l=1.645)?

c)Assume the spreads are normally distributed, what is the cost of liquidation that will not be exceeded with 99% probability (use l=2.326)?