Investment Management

2363 words 10 pages
1. Log on to finance.yahoo.com and enter the ticker symbol RRD in the Get Quotes box to find information about R.R. Donnelley & Sons.

a. Click on Profile. What is Donnelly's main line of business?
R.R. Donnelley & Sons Company provides integrated communication solutions to private and public sectors worldwide. It operates through Publishing and Retail Services, Variable Print, Strategic Services, and International segments.

b. Now go to Key Statistics. How many shares of the company's stock are outstanding? What is the total market value of the firm? What were its profits in the most recent fiscal year?
Shares Outstanding: 199.80M
Market Value: 3.28B
Recent Gross Profit: 2.33B
Profits in the most recent fiscal year => Net
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a. If a market buy order for 100 shares comes in, at what price will it be filled?
A market buy order for 100 shares would be filled at $50.25

b. At what price would the next market buy order be filled?
The next market buy order would be filled at $51.50

c. If you were a security dealer, would you want to increase or decrease your inventory of this stock?
As a security dealer I would want to increase my inventory of this stock because the market currently has more limit-buy orders than limit-sell orders. Also, there is a greater price discrepancy on the limit-sell order side of the book providing more room to sell at a higher price.

5. Suppose that Intel is currently selling at $40 per share. You buy 250 shares by using $7,500 of your own money and borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 105 per annum.

a. What is the percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to (i) $46; (ii) $34?
Net worth: ($40*250)-($10,000-%7,500) = $2,500.00
i. ($46*250)-($10,000-$7,500) = $4,000
Percentage ↑ (4000-2500)/2500 = 60% ii. ($34*250)-($10,000-$7,5000 = $1,000
Percentage ↓ (1000-2500)/2500 = -60%

b. If the maintenance margin is 25%, how low can Intel stock price fall before you get a margin call?
Maintenance Margin = $10,000*0.25 = $2,500.00
250*P – $2,500 / 250*P = 0.25 P = $40
Therefore, Intel Stock price can

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