FIN630 - Investment Analysis & Portfolio Management
Total Marks 5
Starting Date Wednesday, December 01, 2021
Closing Date Tuesday, December 07, 2021
Question Title GDB - 01
Topic to be tested:
Introduction of Market Place (Lesson 03)
To understand the application of Circuit Breakers in the stock exchange.
Application of Circuit Breakers:
A circuit breaker is a regulatory instrument. It is triggered if the index or any stock crosses the price range within which it was allowed to move. It’s core purpose is to prevent excessive speculative gains/losses on a security or catastrophic losses in the market.
Sapphire Fibres Limited (SFL) was listed on stock exchange of Pakistan on 5th June, 1979. The major activities of the company include manufacturing and then sale of yarn, fabrics and garments. On 15th November, 2021 the stock of SFL closed at Rs. 740. Furthermore, the circuit breakers in Pakistan Stock Exchange (PSX) was at 7.5%. (as of this and the next date)
Suppose, you are working as a broker in PSX for last few years. On 16th November 2021, an investor of SFL, named Mr. Muhammad approached you. After a thorough discussion on the current situation of PSX and the company, he finally took a decision to sell 100 shares of SFL on that very day via computerized trading only. Moreover, he mentioned that he wants to sell the stock at any price above Rs. 800.
Keeping in view the concept of circuit breakers, you are required to briefly discuss (Yes/No comment along with reason) whether it would be possible for the stock to be sold above Rs. 800 or not? Moreover, support your answer by showing necessary calculations for price ceiling and price floor of SFL stock.
Your discussion must base on logical facts.
Neither copy your answer from nor exchange with other students. Two identical/copied comments will be marked Zero (0) and may damage your grade in the course.
Obnoxious or ignoble answer should be strictly avoided.
Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.
Moreover, be concise and avoid unnecessary details to answer the given scenario questions.