Investment Management 1. You shorted 2,000 shares of GPRO at $60 a share. 3 mont

Question

Investment Management

1. You shorted 2,000 shares of GPRO at $60 a share. 3 months later, the share price dropped to $45 and you closed out your position. What is your return on this position, assuming no interest in your margin deposit?

2. Uber plans to issue 200 million shares through an IPO offering. The shares will be offered at $30 a share and it will be a firm commitment offering The IPO fees are a discount of 6% plus $50 million. How much money will the firm get from through the IPO?

3. You decided to create an index of social media stocks. The initial index has 3 stocks: GOOG, FB and TWTR. The price of these stocks when the index was created was $700, $100 and $40 respectively. What is the divisor if the index value start at 100? One year from the creation of the index, GOOG and FB has gone up by $50 and $20 respectively, while TWTR has decline by $20. What is the index value? What is the percentage change of index value if GOOG has gone through a 10 for 1 split before the end of the year?

Explanation / Answer

1. Return of this position = 2000*(60-45) = 2000*$15 = $30,000.

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