Examine the stocks listed in Figure 2.8. For how many of these stocks is the 52-week high price at least 50% greater than the 52-week low price? What do you conclude about the volatility of prices on individual stocks?
Stocks are highly volatile
A stock is a share of ownership of a fraction in a corporation, proportionate to the number of shares owned.
On the basis of examination of Figure 2.8, it is found that there are 11 stocks which have a 52 weeks high at least 50% greater than the 52 week low price.
Conclusion: Individual stocks are highly volatile.
Look at the futures listings for corn in Figure 2.10.
a. Suppose you buy one contract for December 2011 delivery. If the contract closes in December at a price of $6.43 per bushel, what will be your profit or loss? (Each contract calls for delivery of 5,000 bushels.)
b. How many December 2011 maturity contracts are outstanding?
For each transaction, identify the real and/or financial assets that trade hands. Are any financial assets created or destroyed in the transaction?
a. Toyota takes out a bank loan to finance the construction of a new factory.
b. Toyota pays off its loan.
c. Toyota uses $10 million of cash on hand to purchase additional inventory of spare auto parts.
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