Simon Owns 10 000 Shares in ABC Inc

question 2

True/False

Simon owns 10 000 shares in ABC Inc.He wanted to sell half of them in order to raise $20 000 in cash.He therefore wrote separate letters to Bronwyn and Gwyneth on June 1.In each case he said,"I will sell 5000 shares in ABC Inc to you for $20 000.Please respond by any reasonable means within one week." Bronwyn replied on June 3 with a letter that said: "I accept your offer." Simon received that letter on June 5.On June 6,he received a fax from Gwyneth that said,"I accept your offer." Simon then informed Gwyneth by telephone that he had already sold the shares to Bronwyn.In that situation,there is no contract between Simon and Gwyneth.

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Definitions:

Equally-Weighted Portfolio

An investment portfolio in which each asset is allocated the same proportion of the total investment, regardless of the asset's market value.

Short Sell

The practice of selling a borrowed security with the intention of buying it back later at a lower price to profit from the price difference.

Arbitrage Pricing Theory

A financial model that estimates the return of an asset by considering multiple risk factors and their respective risk premiums, excluding unsystematic risk through diversification.

Nonsystematic Risk

The risk associated with a specific issuer of a security, also known as idiosyncratic or unsystematic risk, that can be reduced through diversification.