Assume that your brokerage company requires an initial margin of 65% and a maintenance margin of...

Assume that your brokerage company requires an initial margin of 65% and a maintenance margin of 40%. Assume further that you want to buy 1200 shares of Madoka Corp. at $75 per share.

A. Calculate the maximum amount of debt you could borrow.

b. Calculate the price below which you will receive a margin call, assuming you borrowed the amount of debt in “a”.

c. Show what the account balance sheet would look like if the stock reaches the price in “b” above.

d. [From “c”] Show that you are at a 35% margin.

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Assume that your brokerage company requires an initial margin of 60% and a maintenance margin of...

Assume that your brokerage company requires an initial margin of 60% and a maintenance margin of 35%. Assume further that you short 800 shares of Jellyfish Corp. at $40 per share and the price increases to $56. a. Calculate your percentage loss based on your current and initial equity. b. Calculate the percentage change in the value of the stock. c. Show the account balance sheet if you use funds from your account to buy securities and decrease the loan.

A broker requires an initial margin of RM3,000 and maintenance margin of RM1,000 before an investor...

A broker requires an initial margin of RM3,000 and maintenance margin of RM1,000 before an investor can place any trade or in in the futures market. a) What is the meaning of the statement above? b) An investor places one contract of a long position of Kuala Lumpur Index Futures at 1,500. This contract has a multiplier of RM100. At what spot price of Kuala Lumpur Index does the investor need to put up more funds to meet the initial...

Your broker requires an initial margin of $4,500 per futures contract on soybeans and a maintenance...

Your broker requires an initial margin of $4,500 per futures contract on soybeans and a maintenance margin of $3,000 per contract. Each soybean futures contracts are based on 5,000 bushels and quoted in cents per bushel. Yesterday, you bought 5 soybean futures contracts at the closing settlement price of 1372 (i.e., $13.72). Today, the settlement quote is 1340. All margin calls restore margin levels to their initial margin level. A Will you receive a margin call and if so, for what...

Kenix Brokerage House (KBH) provides brokerage services, including margin trading. Initial margin requirement is set at...

Kenix Brokerage House (KBH) provides brokerage services, including margin trading. Initial margin requirement is set at 50% with maintenance margin of 30%. Margret plans to short 1,000 shares of Tasty Meat at $50 per share. a) Without considering interest cost of borrowing stock, how high the Tasty Meat price is when Margret gets a margin call? (rounded your answer to 4 decimal places) How much cash should she deposit in order to maintain the percentage margin back to 40%? b)...

Question 2 (15 marks) Kenix Brokerage House (KBH) provides brokerage services, including margin trading. Initial margin...

Question 2 Kenix Brokerage House (KBH) provides brokerage services, including margin trading. Initial margin requirement is set at 50% with maintenance margin of 30%. Margret plans to short 1,000 shares of Tasty Meat at $50 per share. a) Without considering interest cost of borrowing stock, how high the Tasty Meat price is when Margret gets a margin call? (rounded your answer to 4 decimal places) How much cash should she deposit in order to maintain the percentage margin back to...

Suppose a margin account has an initial margin requirement of 50% and a maintenance margin requirement...

Suppose a margin account has an initial margin requirement of 50% and a maintenance margin requirement of 25%. The account currently has a balance of $10000, so the initial buying power is $ ___ Suppose the total leverage is used to buy a stock at the price of $5.00/share. When the stock price falls below the critical price of $ ___ /share, a margin call will be sent to the account holder

Use the following data for questions 8-11. Assume an initial margin requirement of 55% and maintenance...

Use the following data for questions 8-11. Assume an initial margin requirement of 55% and maintenance margin of 40%. An investor has $5,500 in cash and wishes to purchase ABC stock. ABC is currently trading at $100 per share and your broker charges 7.5% interest on margin loans for the period. 1- What is the return on equity of the margin position after one year when price rises to $120? 2-What is the return on equity of the margin position...

Use the following data for questions 8-10. Assume an initial margin requirement of 55% and maintenance...

Use the following data for questions 8-10. Assume an initial margin requirement of 55% and maintenance margin of 40%. An investor has $5,500 in cash and wishes to purchase ABC stock. ABC is currently trading at $100 per share and your broker charges 7.5% interest on margin loans for the period. 8. What is the return on equity of the margin position after one year when price rises to $120? (a) 20.23% (b) 30.23% (c) 40.23% (d) None of the...

Suppose the initial margin as established by Stock Market Regulators is 35%. The maintenance margin is...

Suppose the initial margin as established by Stock Market Regulators is 35%. The maintenance margin is 20%. Suppose that you have $15,000 in cash that you wish to invest in stock SYPHAX which currently sells for $60 per share. This stock does not pay dividends. 1. If you buy on margin, what is the maximum number of shares that you can purchase? Draw an assets-liabilities table for this transaction. 2. Ignoring interest expenses, at what stock price will you get...

At what price will you get a margin call if the maintenance margin is 30%? Initial margin = 50%

You have opened a stock portfolio account with a brokerage firm. You have only purchased stocks of Home Depot. You purchased 200 shares of HD at $178/share.At what price will you get a margin call if the maintenance margin is 30%? Initial margin = 50%

Subjects