If Easy Work dropped to $23.00, then $22.57, and then rallied back to $26.00, you would have been sold out.
Limit orders, including stop-loss orders, require careful analysis before they are placed.
When choosing among market, limit, and stop-loss orders, you must consider the stock's probable fluctuations as well as the need to purchase or sell the stock.
Money market deposit accounts or bonds offer better returns than risky stocks, options or futures.
PArT options and futures are risky investments.
One of the things to protect against.
The low-risk asset acts as a buffer against the easiest ways to build wealth.
Taking advantage of a program in the possibility of future opportunities is a second reason for maintaining funds in a low-risk asset.
When an opportunity arises, your employer will be able to take advantage of it by matching an investor with extra cash.
You don't need to disturb the account if you set aside funds in a liquid investment for your retirement plan.
Your employer has a portfolio.
Money market deposit is almost like getting an instant 100% accounts at financial institutions and money market mutual funds.
Financial institutions offer products that are more competitive with those offered by mutual funds and stock broking firms.
Knowing when to sell a stock is as important as knowing which stock to buy.
You should review your portfolio periodically and consider possible sales.
There are two issues that are relevant to the sale decision.
Investment actions are affected by taxes.
All inves pp.
Capital losses can be written off against other income if they exceed a maximum of $3,000.
When you have a capital gain against which you can apply the loss, is the best time to sell.
Before taking action, one should carefully consider the tax consequences of investment sales.
Buying an investment at its lowest price and selling it at its top price would be great for investors.
You should sell an investment if it doesn't meet your needs.
If an invest ment has become riskier than it should be sold.
The tax consequences help determine when to sell.
Taxes aren't the most important consid eration in a sale decision.
The over riding concerns should be considered in the dual concepts of risk and return.
It is important to take the time to examine each investment in light of its relative risk and return performance.
You should sell investments that no longer fit in the portfolio and buy investments that are more suitable.
You shouldn't hold out for every nickel of profit.
The value of their holdings plummets when they hold out for the top price.
If an investment looks ripe to sell, take the profit, and enjoy your good fortune, then sell it.
The timing of security transactions can be influenced by formula plans.
Explain the logic behind the plans.
Give a brief description of each of the following plans.
When securities are bought or sold, describe how a limit order can be used.
There are two reasons why an investor would want to maintain funds.
Before making a decision to sell an investment, describe the two items that should be considered.
Assets are allocated to protect against negative developments while taking advantage of positive ones.
Fixed weights, flexible weights, and tactical asset allocation are some of the basic approaches to asset allocation.
Buying shares in an asset allocation fund can be done on a do-it-yourself basis.
Plan 13.2 the performance of individual investments, gather current market information and stay abreast of international, national, and local economic and market developments.
Market behavior can be assessed with the use of market indicators such as the DOW Jones Industrial Average and bond market indicators.
The holding period return can be used to measure the performance of individual investments.
The total return is earned on the investment during an investment period of less than a year.
HPR can be compared to investment goals to see if the proper return is being earned for the risk involved.
To measure portfolio return, estimate the amount invested, the income earned, and any Video Learning Aid for capital gains over the relevant current time period.
The holding period return is calculated by dividing the total returns by the amount of investment during the period.
The portfolio's performance relative to the market can be compared with the portfolio's HPR.
The risk premium per unit of risk can be compared with similar market measures to assess the portfolio's performance.
The portfolio's excess return is calculated using Jensen's measure.
Jensen's measure is easy to calculate and makes both risk and market adjustments.
When the portfolio fails to meet the investor's objectives and returns are not acceptable, the portfolio should be revised.
Limit and stop-loss orders can be used to make a portfolio rebalancing happen.
Money market deposit accounts and money market mutual funds are low-risk, highly liquid investments.
It is possible to protect against total loss and seize any attractive opportunities.
Investment sales should be timed to get maximum tax benefits and contribute to the achievement of the investor's goals.
The customer relationship manager at the major bank is 25 years old.
Most of his personal portfolio is made up of bonds, value stocks, and exchange traded funds listed on the Nigerian Stock Exchange.
He feels that his portfolio is too conservative because he is young and has a secure job.
He wants to know your opinion on his asset allocation.
He married with three kids after 10 years with a more aggressive portfolio.
He is working for a private company in an economically unstable environment.
A company whose stock is listed and traded on a major exchange is a good choice.
Find the stock's closing price at the end of each of the preceding six years and the amount of dividends paid in each of the preceding five years.
The value of the Industrial Average at the end of each of the preceding six years is obtained.
The pretax holding period return on the stock is calculated using Equation 13.1.
During the preceding five years, study the international, national, and local economic and market developments.
The five-year period of concern is when you can compare the stock's returns to the DJIA.
Theodhora is a data architect at a major bank.
She is in the 23% tax brackets because she is paid more than L140,000 a month.
Capital gains and interest income are taxed at 15% regardless of the holding period.
Two years ago, she invested L500,000 in a five-year government bond.
Two years ago, she bought a 100% par value bond.
One year ago, it was revalued at 101%, and now it is at 103% in the market.
Theodora doesn't have a source of income other than her salary because the government will change the treatment of capital gains and interest income next year.
Three years ago, the portfolio was created by purchasing 200 shares of each of the six stocks.
The acquisition price of each stock, the annual dividend paid by each stock, and the year-end prices for the three calendar years can be found here.
Find the amount invested in the portfolio over the course of three years.
The unrealized capital gains from the portfolio are determined for each of the three years.
Consider the following UK stocks, which are members of the FTSE 100 index, and record their prices at the start and end of the most recent calendar.
You should invest the same amount in each stock.
The current risk-free rate is a good proxy for the risk-free rate for a UK investor and the market return is a good proxy for the market.
The standard deviation of the market portfolio is 12%.
Evaluate the portfolio.
A money market mutual fund and a high-growth mutual fund are available.
Find and record their closing net asset values at the end of the week.
You can use dollar-cost averaging to buy shares in both the high-growth and the money market funds by purchasing $100 of each of them at the end of each week for a total investment of $10,400.
The total year-end fund values should be compared to the total that would have resulted from investing $5,200 in each fund at the end of the first week.
Assume you use a constant-dollar plan with 50% invested in the high-growth fund and 50% in the money market fund.
When the speculative to the conservative ratio is greater than or equal to 0.75, you use a constant-ratio plan to get the rebalancing to the 50:50 mix.
A young couple with above average salaries are working in the financial industry.
They are looking at their investment objectives.
Both portfolios had the same holding period return last year.
Most of the returns from Portfolio A came from dividends, while most of the returns from Portfolio B came from capital gains.
In December of 2016 John purchased 100 shares of Tomco Corporation.
He held the shares for 15 months and sold them for $2,500.
He was paid $3 per share in cash dividends when he held the stock.
He bought 100 shares of the German stock through his broker.
He bought the stock for 35 euro per share in March and sold it for 45 euro per share three months later.
She pays a 15% capital gains rate on dividends and a 31% ordinary tax rate for holding periods longer than a year.
Lloyd bought five option contracts to speculate on the price of the stock.
He paid PS1,750 for each contract because it was worth 1,000 shares of the stock.
He sold the five contracts for a total of PS2,250 after five months.
Mom and Pop owned a portfolio of long-term bonds.
The face value of the bonds is $100,000.
Simon Love's portfolio of 15 common stocks had a market value of $264,000.
Simon sold one of the stocks at the end of May for $31,500.
The funds were not reinvested in the portfolio during the year.
He received a total of $12,500 in dividends from his stocks.
Simon's portfolio had a market value of $250,000 on December 31, savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay savesay The HPR can be found on Simon's portfolio.
A return of 11.8% is what the portfolio earned during the year just ended.
The standard deviation of return was 14.1%.
There is a risk-free rate.
The return on the market portfolio was 9.0% and the standard deviation was 9.4%.
Anna Shultz's portfolio had a return of 8.6% during the year just ended.
The risk-free rate is 3.3% and the return on the market portfolio was 9.2% for the year just ended.
Paolo held a diversified portfolio of Italian stocks that had a 3% return for the year, and a 1% return after taxes.
A good proxy for the market return, the FTSE MIB recorded a loss of 1.5% over the same year.
If Paolo earned more than the required return on his portfolio, Jensen's measure and the Italian three-month government bill could be used.
Chee Chew's portfolio had a return of 12.9% for the year just ended.
The risk-free rate is 4%.
The market portfolio returned 11.0% in the year just ended.
Compare the performance of Chee's portfolio to that of Carri Uhl's portfolio, which has a Jensen's measure of -0.24.
There is a risk-free rate.
The Fio family's portfolio and the market portfolio during the year just ended can be answered with the data in the accompanying table.
Evaluate the performance of the Fios's portfolio during the year just ended.
For the past two years, Cone has used a dollar-cost averaging formula to chase FCI common stock.
The following table shows the price per share paid over the two years.
Assume that the transactions were not paid for by the broker.
If you use the data in the following table, you can assume that you are using a constant-dollar plan.
The MM mutual fund represents your conservative portfolio, while the stock price represents your speculative portfolio.
A constant-ratio plan is being used by Antonio Cassini.
He has 300 shares of an aggressive growth stock priced at 50 euro and the rest of his portfolio invested in Italian government bonds with a total value of 5000 euro.
Antonio has put a rebalance Trigger of speculative-to-conservative of 2.5 and that, after a month, the price of the Italian government bond increases to 110%.
If you use the data in the following table, you are using a variable-ratio plan.
When the speculative portfolio reaches 60 percent of the total, you will reduce its proportion to 45%.
Mary and Nick have an investment portfolio with four investments.
They needed a balance between current income and capital appreciation.
Rather than buying mutual fund shares, they developed a portfolio that diversified across various asset classes.
Common stock, industrial bonds, mutual fund shares, and options make up the portfolio.
They acquired each of these investments over the past three years and plan to purchase more in the future.
The Stalchecks are interested in measuring the return on their investment and how well they have done relative to the market.
They hope that the return earned over the past calendar year is in excess of what they would have earned by investing in a portfolio consisting of the S&P 500 stock index.
With the help of a friend, they have been able to estimate the alpha of their portfolio.
They plan to ignore taxes because they feel their earnings have been adequately protected.
Since they did not make any portfolio transactions in the past year, all of their investments have been held for more than a year.
The following information has been gathered by the Stalchecks to make the necessary calculations.
They have 400 shares of common stock.
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Its share price went from $17.25 at the beginning of the year to $18.75 at the end of the year.
The dividends were paid in quarterly installments of $0.20, $0.20, and $0.25.
The bonds have a $1,000 par value and a 9.250% coupon.
Moody's rates them A-rated.
The bonds were quoted at 97.000 at the beginning of the year and ended the year at 96.375%.
The Holt Fund is a balanced, no-load mutual fund.
Investment income and capital gains were included in the fund's dividends.
The NAV at the beginning of the year was $19.45, and it ended the year at $20.03.
They own 100 options contracts on the stock of the company they follow.
The contracts had a value of $26,000 at the beginning of the year.
The total value of the options contracts was $29,000 at the end of the year.
If the Stalchecks's ordinary income is taxed at a combined (fed eral and state) tax rate of 38% and they pay a 15% capital gains tax on dividends and capital gains for holding periods longer than 12 months, determine the after-tax HPR.
The before-tax portfolio HPR for the four investment portfolios was calculated because all of the gains on the investments were unrealized.
Evaluate the return against its income and capital gain components.
The measure can be used to analyze the performance of the portfolio on a risk-adjusted basis.
Charles Spurge wants to develop a rational basis for timing his portfolio transactions.
He currently holds a security portfolio with a market value of $100,000, divided equally between a very conservative, low-beta common stock, ConCam United, and a highly speculative, high-beta stock, Fleck Enterprises.
Charles does not believe that it is necessary to invest in 8 to 15 securities.
One can achieve the same results by holding a two-security portfolio in which one security is very conservative and the other is speculative, according to his analysis.
His thinking on this point will not change.
He plans to keep the two-security portfolio until he finds out that his theory doesn't work.
He has earned a rate of return in excess of the market-adjusted rate expected on his portfolio.
Charles wants to develop his own formula plan for timing portfolio transactions.
The evaluation of four common formula plans is the current stage of his analysis.
The plans he is considering are dollar-cost averaging, constant-dollar plan, constant-ratio plan, and variable-ratio plan.
Two types of data will be used in Charles's analysis.
The other plans involve periodic purchases and sales.
Different data is needed to evaluate the plans.
Charles decided to assume an invest ment of $500 at the end of each 45 day period for evaluating the dollar-cost averaging plan.
He wanted to achieve certain savings by making larger transactions.
The total amount Charles invested in the past year was equaled by the $500 per 45 days.
He would assume that half of the investment was in the conservative stock and the other half in the speculative stock.
The accompanying table shows the share prices for each of the stocks when purchases were to be made.
Charles decided to start with a $4,000 portfolio split evenly between the two stocks.
He chose to use $4,000 because it would correspond to the total amount invested in the two stocks over the course of a year.
He planned to use the same eight points in time to assess the portfolio and make transfers.
The following triggering points were established for each of the plans evaluated.
When the speculative portion of the portfolio is worth more or less than its initial value, the portfolio is rebalanced to bring it back to its $2,000 value.
When the speculative portion of the portfolio is greater than or equal to 1.15 or less than or equal to 0.84, the portfolio is sold or purchased to bring the ratio back to its initial level.
When the speculative portion of the portfolio's value goes above 50% of the total value of the portfolio, its proportion is reduced to 46%.
When the speculative portion of the portfolio falls below 38% of the total value of the portfolio, its proportion is raised to 50%.
The total number of shares purchased, the average cost per share, and the year-end portfolio value are all expressed in dollars under the dollar-cost averaging plan.
The year-end portfolio value is expressed in dol lars and as a percentage of the amount initially invested for the conservative portion, speculative portion, and the total portfolio.
To answer all parts, be sure to do so.
To answer all parts, be sure to do so.
You can summarize them in tabular form.
Formula plans are mechanical methods of managing a portfolio that attempt to take advantage of price movements.
The goal is to reduce the level of risk faced by the investor.
Dollar-cost averaging is a formula plan.
A fixed dollar amount is invested in a security.
The goal is to increase the value of the security over time.
When market prices increase, fewer shares are purchased.
An investor is more likely not to buy overvalued securities.
The dollar-cost averaging formula has been used by Mrs. Paddock to purchase $1,000 worth of Neo common stock each month.
The table shows the monthly price per share paid over the course of a year.
Assume that Mrs.
These transactions were not paid for by Paddock.
You can view stock through dollar-cost averaging if you create a spreadsheet model similar to the one in Table 13.9%.
The structure of mutual funds, portfolio diversification, portfolio returns, and the administration of personal portfolios are some of the topics covered in Chapters 11, 12 and 13 of this text.
An analyst compared the performance of a hedge fund index with the performance of a major stock index over the past eight years.
She noted that the hedge fund index had a higher average return, lower standard deviation, and higher Sharpe ratio than the stock.