If delay cost is calculated as
Shares purchased/Shares ordered x (Closing price - Benchmark price)
the closing price on Monday is 9.99, on Tuesday is 10.01 and benchmark price is 10, shouldnt the delay cost be
monday 9.99-10.00 and on Tuesday 10.01-10? The solution has
monday 10 - 10 and on Tuesday 9.99 - 10.
Any thoughts?
I figured it out. Schweser has a better explanation. It is not Closing price but previous days closing price.
This still does not make sense. Is it errata? pg. 52 Volume 6, #11(B)
Price at decision was 10.00 on Monday morning. Bought 600 shares out of 1,000 shares wanted.
Closing price on Monday = 9.99. Closing price on Sunday - we don’t know!!! Their Monday Calculation = (600/1000)*(10-10)/10 … WHAT?
Delay costs = (% of order filled)*(diff between closing price on day the order was not filled and previous days closing price).
They state that the Monday closing price was 9.99. WHY IS THIS NOT IN THE MONDAY DELAY COSTS! ARGH!!!
I think what the problem meant to say is: Purchase 1000 shares on monday if the price equals or exceeds $10. The reason they said $10, was based on the closing price of the previous day (best estimate). Which is why you would have zero delay costs on the 600 you purchased on Monday because you didn’t really delay it that day. You did delay the 100 shares you purchased the following day. You could have fulfilled it on Monday @ the closing price the least, but you chose to postpone.