2000 Level 3 Q28 Question: Can someone help to calculate the implementation shortfall (%)? The implementation shortfall (in $) is $2.80. Thanks. Extracted info: 10.00am: A port mgr gives the following order to a trader - SELL 50,000 shares TRP (market price $43.00) 10.30am: The trade desk places the order with a broker (market price $41.00) 10.31am: The broker executes the sale of 50,000 TRP shares at $40.25; commission is $0.05 per share 3 days later: The market price of TRP closes at $38.00 Recap: The implementation shortfall for a sell order is [Real portfolio gain - Paper portfolio gain]/ Paper portfolio investment
Paper portfolio = 50,000*43.00 = 2,150,000 actual sale = 50,000*40.25 = 2,012,500 commission .05*50,000 = 2500 so, 2,150,000 - 2,012,500-2500 = 135,000/2,150,000 = 6.3%??
mkt px was $43 when the PM gives the order to the trader. stock gets done FULLY at $40.25 but you pay 5 cents a share commission, so effectively you’re selling at 40.2/share. 43 - 40.2 = 2.8/share.
same as bani here
agree with banni
ahh, missed the per share part…