You purchased 1000 shares of Dell stock on margin at $70 per share. Assume the initial...

You purchased 1000 shares of Dell stock on margin at $70 per share. Assume the initial margin is 50% and the maintenance margin is 40%. Assume the stock pays no dividends, and ignore interest on the margin loan.

a.What is the rate of return on his investment if the price rises to $85 per share?

b.What is the margin if Stock price falls to $60 per share, will the investor receive a margin call ?

c.How far can the stock price fall before a margin call?

Expert Solution

jeff jeffy answered 7 months ago

Assume you sold short 100 shares of common stock at $70 per share. The initial margin...

Assume you sold short 100 shares of common stock at $70 per share. The initial margin is 30%. What would be the maintenance margin if a margin call is made at a stock price of $85? A) 40.5% B) 20.5% C) 35.5% D) 23.5% E) none of the above 53. You sold short 100 shares of common stock at $45 per share. The initial margin is 30%. At what stock price would you receive...

You purchased 250 shares of common stock on margin for $45 per share. The initial margin...

You purchased 250 shares of common stock on margin for $45 per share. The initial margin is 60%, and the stock pays no dividend. Your rate of return would be ________ if you sell the stock at $48 per share. Ignore interest on margin. 0.132 0.238 0.111 0.208

You purchased 100 shares of common stock on margin for $150 per share. The initial margin...

You purchased 100 shares of common stock on margin for $150 per share. The initial margin requirement is 65%, the maintenance margin requirement is 40%. Find your rate of return in % if you sell the stock at $180 per share exactly 1 year later if interest rate on margin loan is 10%

1) Assume you buy 100 shares of stock at $40 per share on margin. The initial...

1) Assume you buy 100 shares of stock at $40 per share on margin. The initial margin is 50%. If the price rises to $55 per share, what is your percentage gain on the initial equity?

You purchased 100 shares of IBM common stock on margin at $151 per share. Assume the...

You purchased 100 shares of IBM common stock on margin at $151 per share. Assume the initial margin is 50%, and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin. Round your answer to the nearest cent (2 decimal places).

You purchased 100 shares of Express Scripts common stock on margin at $70.38 per share. Assume...

You purchased 100 shares of Express Scripts common stock on margin at $70.38 per share. Assume the initial margin is 50% and the maintenance margin is 30%. One year later, the stock price closes at $71.75. If the broker’s call loan rate is 2.00%, what is your return on equity? Can I please get a step by step breakdown so that I can better understand the process involved? Thank you.

You purchased 800 shares of stock for $49.20 a share. The initial margin requirement is 65...

You purchased 800 shares of stock for $49.20 a share. The initial margin requirement is 65 percent and the maintenance margin is 35 percent. What is the lowest the stock price can go before you receive a margin call? What is the lowest the stock price can go before you receive a margin call if both the initial and maintenance margins are 100%? What is the lowest the stock price can go before you receive a margin call if both...

An investor buys 400 shares of stock selling at $70 per share using a margin of...

An investor buys 400 shares of stock selling at $70 per share using a margin of 40%. The stock pays annual dividends of $2 per share. A margin loan can be obtained at annual interest cost of 6%. Determine what return on invested capital the investor will realize if the price of the stock increases to $94 within twelve months. A. 33.54% B. 34.29% C. 37.14% D. 55.90% E. 83.86%

An investor shorts 100 shares of a stock at $52 per share with initial margin of...

An investor shorts 100 shares of a stock at $52 per share with initial margin of 50% and no interest. The maintenance margin is 30%. Suppose the closing prices for the stock over the next three days is $56, $60 and $58. What are the values for margin and equity in the investor’s account at the end of day three?

Suppose that you just purchased 250 shares of Beta Banana’s stock for $70 per share. The...

Suppose that you just purchased 250 shares of Beta Banana’s stock for $70 per share. The initial margin requirement is 76.5%, which means the amount borrowed is $4,112. The corresponding balance sheet is below: Assets Liabilities and Equity Stock $17,500.00 Loan from broker $4,112.50 Equity $13,387.50 Total assets 17,500.00 Total liabilities and equity $17,500.00 a. Now suppose the price of the stock falls to $45 per share. What is your current margin percentage? (Round your answer to 2 decimal places.)...

Question