Compute the holding period returns

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(a) Tim purchased ABC stock at $40 per share and XYZ stock at $35 per share on the same day in 2015. Exactly 6 months later, the ABC stock is worth $42.00 per share and has not paid a dividend while the XYZ stock is worth $36 per share and has paid 2 quarterly dividends of $0.50 each.

(i) Compute the holding period returns for these stocks for the six-month period.

(ii) If both stocks are of the same risk which stock should Tim avoid investing in? Explain why?

(b) You sell 200 shares of a stock short for $60 per share. You want to limit your loss on this transaction to no more than $2300. What order should you place and at what price?

Reference no: EM132790859

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