question archive Suppose a speculator borrowed 50,000 Rio Tinto shares at time T and put a sale order for the shares at T+5 for 100 dollars each
Suppose a speculator borrowed 50,000 Rio Tinto shares at time T and put a sale order for the shares at T+5 for 100 dollars each
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Suppose a speculator borrowed 50,000 Rio Tinto shares at time T and put a sale order for the shares at T+5 for 100 dollars each.
Which of the following statements is correct?
| A. |
This is an ordinary sale. |
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| B. |
The speculator does not have an exercisable and unconditional right to vest the shares in the buyer. |
|
| C. |
This creates a long position. |
|
| D. |
This sale is illegal if the seller is not a professional arbitrageur or a professional dealer. |
|
| E. |
The speculator needs to report the sale to its broker. |
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A is correct
The correct answer is This is an ordinary sale
Explanation
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The speculator does not have an exercisable and unconditional right to vest the shares in the buyer. |
False Speculator has an exercisable and unconditional right to vest shares in buyer |
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This creates a long position. |
A short position is created as (sold) |
|
This sale is illegal if the seller is not a professional arbitrageur or a professional dealer |
This sale is authorized |
|
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this is incorrect is because the broker in such an instance already knowns that the speculator borrowed the shares. |
