{"id":197850,"date":"2025-03-07T18:38:59","date_gmt":"2025-03-07T18:38:59","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=197850"},"modified":"2025-03-07T18:39:01","modified_gmt":"2025-03-07T18:39:01","slug":"as-an-investor-you-expect-the-price-of-a-start-ups-shares-to-drop-in-the-near-future-due-to-an-anticipated-failure-in-technology","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/07\/as-an-investor-you-expect-the-price-of-a-start-ups-shares-to-drop-in-the-near-future-due-to-an-anticipated-failure-in-technology\/","title":{"rendered":"As an investor, you expect the price of a start-up’s shares to drop in the near future due to an anticipated failure in technology"},"content":{"rendered":"\n

As an investor, you expect the price of a start-up’s shares to drop in the near future due to an anticipated failure in technology. As a result, you sell 200 shares of this company at $17.50 per share. How much would you earn or lose on this transaction if you repurchased the shares four months later at a price of $14.75 per share?<\/p>\n\n\n\n

The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n

Correct Answer:<\/h3>\n\n\n\n

You would earn<\/strong> $550 on this transaction.<\/p>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

To calculate how much you earned or lost on this transaction, let’s break it down step by step:<\/p>\n\n\n\n

    \n
  1. Initial Sale of Shares:<\/strong><\/li>\n<\/ol>\n\n\n\n
      \n
    • You sold 200 shares at a price of $17.50 per share<\/strong>.<\/li>\n\n\n\n
    • Total amount from selling:
      [
      200 \\times 17.50 = 3500 \\, \\text{dollars}
      ]<\/li>\n\n\n\n
    • So, you received $3500<\/strong> from selling the 200 shares.<\/li>\n<\/ul>\n\n\n\n
        \n
      1. Repurchase of Shares After Four Months:<\/strong><\/li>\n<\/ol>\n\n\n\n
          \n
        • You then repurchased the 200 shares at a price of $14.75 per share<\/strong>.<\/li>\n\n\n\n
        • Total amount spent on repurchasing:
          [
          200 \\times 14.75 = 2950 \\, \\text{dollars}
          ]<\/li>\n\n\n\n
        • So, you spent $2950<\/strong> to buy back the 200 shares.<\/li>\n<\/ul>\n\n\n\n
            \n
          1. Calculation of Earnings or Losses:<\/strong><\/li>\n<\/ol>\n\n\n\n
              \n
            • The difference between what you received from selling the shares and what you paid to repurchase them is your profit (or loss).<\/li>\n\n\n\n
            • Profit\/Loss = Amount from selling – Amount spent on repurchasing
              [
              3500 – 2950 = 550 \\, \\text{dollars}
              ]<\/li>\n\n\n\n
            • You earned $550<\/strong> in profit from this transaction.<\/li>\n<\/ul>\n\n\n\n

              Key Takeaways:<\/h3>\n\n\n\n
                \n
              • When you initially sold the shares at $17.50 per share, you received $3500 for the 200 shares.<\/li>\n\n\n\n
              • After four months, when the price dropped to $14.75 per share, you repurchased the same number of shares (200) for $2950.<\/li>\n\n\n\n
              • The difference between the amount you received and the amount you spent is your profit, which is $550.<\/li>\n\n\n\n
              • Essentially, by selling high and repurchasing low, you earned a profit of $550.<\/li>\n<\/ul>\n\n\n\n

                This strategy is an example of short selling<\/strong>, where you sell shares you do not currently own with the expectation that the price will fall. Later, you buy the shares back at a lower price to make a profit. In this case, the anticipated price drop worked in your favor, allowing you to earn money on the transaction.<\/p>\n","protected":false},"excerpt":{"rendered":"

                As an investor, you expect the price of a start-up’s shares to drop in the near future due to an anticipated failure in technology. As a result, you sell 200 shares of this company at $17.50 per share. How much would you earn or lose on this transaction if you repurchased the shares four months […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-197850","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/197850","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=197850"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/197850\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=197850"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=197850"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=197850"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}