Fred Jury Is a Portfolio Manager Who Has $1,200,000 of a Client's

question 95

Essay

Fred Jury is a portfolio manager who has $1,200,000 of a client's money to invest in highly speculative instruments.Jury is contemplating the purchase of 40,000 shares of Shakee Corp.common stock,which is currently selling on the TransCanada Stock Exchange at $30.00 per share.Alternatively,he could buy warrants on Shakee Corp.common for $6.60.Each warrant gives the holder the right to buy one share of Shakee Corp.common stock at $27.00 per share.
A)How many warrants could Mr.Jury buy with the $1,200,000?
B)If he had purchased the common stock directly,and its price had increased to $37.20 per share,calculate his dollar and percentage return on the investment.
C)Assume that when the price of the stock goes to $37.20 per share,the warrant sells for its intrinsic value.If Jury sells his warrants at this point,calculate his dollar and percentage return on the investment.

• A)How many warrants could Mr.Jury buy with the $1,200,000?
• B)If he had purchased the common stock directly,and its price had increased to $37.20 per share,calculate his dollar and percentage return on the investment.
• C)Assume that when the price of the stock goes to $37.20 per share,the warrant sells for its intrinsic value.If Jury sells his warrants at this point,calculate his dollar and percentage return on the investment.

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Definitions:

Novel Task

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Performance Increase

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