Question

NYSE NASDAQ
Bid Ask Bid Ask
Compasny X $149.55 $150.45 $149.87 $150.13
Company Y $127.88 $128.12 $127.70 $128.30

Currently you have $120.00 in cash and 1000 shares of Stock Y in your brokerage account. You plan to simultaneously sell 1000 shares of Stock Y, then purchase as many shares of Stock X as possible. Assume you cannot borrow or buy partial shares of stock; you will also buy or sell at the best price offered. Based on the quotes provided, the cash balance in your brokerage account after you purchase the shares of Stock X is closest to:________

a. $(60.89)
b. $59.11
c. $87.95
d. $89.24
e. $106.10

Answer 1

Answer:

Option d ($89.24) is the correct option.

Explanation:

The given values are:

In cash,

= $120

Throughout stock Y,

= 1000 shares

Throughout NYSE, the stock Y would be

= $127.88.

Amount procured by offering to buy the Y stock throughout NYSE will be:

= $1000\times 127.88$

= $127880$

The total amount throughout the Demat account will be:

= $120+127880$

= $128000$

For stock X, the minimum lowest price would be in NASDAQ,

Now,

The buying stock X will be:

= $\frac{128000}{150.13}$

= $852.59$ i.e., $852 \ shares$

The invested amount will be:

= $180\times 150.13$

= $127910.76$

So the cash amount in brokerage a/c will be:

= $128000-127910.76$

= $89.24$