Finance 340

Fin 340/Chapter 03 – Securities Markets

Reading assignment:

Please write one or two paragraphs answering each of the following questions.

Please submit your assignment electronically before 8:30am of the due day.

[Do not stop reading! Chapter 3 are easy to read and have valuable information about the securities markets and how to invest in them].

For the 11th version of the textbook:

1) Read section 3.2 ‘How Securities Are Traded’

- Describe one type of markets.

- Describe one type of orders.

2) Read section 3.7 ‘Trading Costs’

- Describe full-service and discount brokers.

- Look at the website of one discount broker (for example Schwab, E*Trade, or Ameritrade). What is the commission you have to pay for buying/selling stocks? bonds? or options?

3) Read section 3.9 ‘Short Sales’

- Describe the difference between buying stocks and short selling stocks? When would you do short sales?

- You sold short one stock of Google for $500. After one month Google price was $450 and during the month Google paid a dividend of $2. What was your profit? What if the Google’s price was $550 at the end of the month?