Question

Shares of CDT have been trading on the New York Stock Exchange over the last 35...

Shares of CDT have been trading on the New York Stock Exchange over the last 35 years from a low of $4 to a high of $64. You buy one share of CDT today for the price of $27. What is your maximum loss on the share?

a. 37
b. 27
c. 64
d. 25

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Answer #1

Answer :

Low price of CDT=$4

High price of CDT=$64

BUY one share of CDT today =$27.

Actually for calculation of loss or profit we need current market price along with buy price

But there is only the 35 years range is given $4-$64

In this problem the maximum loss is $27 because of risk in the market is unlimited.

In this case upside movement also possible but as per concepts of accounting profit can only be recognized after it has been earned.

So there is a possibility (risk) of getting maximum loss of $27.

So the answer is option B.

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