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Investment Analysis for purchase of stock

The stock of the Madison Travel Co. is selling for $56 per share. You put a limit buy order at $48 for one month. During the month, the stock price declines to $46, then jumps to $66, which is the month-end price.

a. Ignoring commissions, what would have been your rate of return on this investment?
b. What would be your rate of return if you had put in a market order?
c. What if your limit order was at $45?

Solution Preview

a. Since your limit order for at $48, while the share is dropping from 56 to 46, your order will activate when the share price is 48. Then share ...

Solution Summary

Investment Analysis for purchase of stock of Madison Travel Co using a limit buy order