IBM stock is selling for $108. per share today. One month ago, the stock was selling for $102.?

Question

IBM stock is selling for $108. per share today. One month ago, the stock was selling for $102. One month ago you put in a limit order to buy one share for $100. During the month, the stock price dropped to $96., then jumped to $111., before falling back to $108.

A.) Ignoring commissions, what was your rate of return on this transaction?

B.) What would have been your rate of return if you put in a market order at the beginning of the month?

C.) What would have happened if your limit order was at $93.?

Answer 1

<<<Ignoring commissions, what was your rate of return on this transaction?>>>

Your current rate of return is 8%. [100($108-$100)/$100]

<<<What would have been your rate of return if you put in a market order at the beginning of the month?>>>

Your rate of return would currently be 5.88% [100($108-$102)/$102]

<<<What would have happened if your limit order was at $93.?>>>

You never would have bought the stock so there would have been no investment, hence there would be no rate of return.