Question

In: Finance

john is very bullish on gpros equity issues and purchases $46000 worth of gpro on 45%...

john is very bullish on gpros equity issues and purchases $46000 worth of gpro on 45% margin with an interest rate of 7% on the loan from the broker. what is annes rate of return if gpro stock goes up 16% in the next year

Solutions

Expert Solution

John has purchase stock worth of $46000. John has bought stock on 45% margin with an interest rate of 7% on loan. Buying on margin means amount borrowed from broker to purchase stock.

So, amount borrowed from broker = $46000*45% = $20700

Interest chargeable on amount borrowed = $20700*7% = $1449.

If Stock goes up 16% in next year. So value of stock next year = $46000+16% = $53360

Annual Return on stock = [(END value - Cost incurred - beginning value)/beginning value]*100

=[(53360-46000-1449)/46000]*100

=12.85%

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Question I Value Derivatives An investor is very bullish on LewCo, a nondividend paying company. The...
Question I Value Derivatives An investor is very bullish on LewCo, a nondividend paying company. The current spot price of the company’s equity is $50 per share. The investor is confident the company will solve the social distancing issue and that the value of the stock will be at least $100 in 12 months. The investor uses a 12-period binomial tree assuming S0 = $50 T = 12 months r = 30 basis points per month u=1.1 per month d...
A company XYZ needs 1 million € worth of funds. It issues bonds worth 100,000 €....
A company XYZ needs 1 million € worth of funds. It issues bonds worth 100,000 €. Each bond has a par value of 1000 € and a coupon rate of 5% each year for 10 years. The current market price of the bond is 850 €. Remaining amount company raises by selling shares. The required rate of return on its shares is 8% and the marginal tax rate is equal to 20%. Calculate the WACC? part b): BB industries’ share...
John and Peter started their retirement savings at age 21. Since John is a very conservative...
John and Peter started their retirement savings at age 21. Since John is a very conservative person, he chose a very safe mutual fund. However, Peter chose an aggressive mutual fund. They have saved monthly the same amount for 40 years. John earned 10% annual return from his mutual fund but Peter earned 5% annual return from his mutual fund. Choose which one is correct about their account balance when they retired. A) John’s retirement account balance is exactly 50%...
John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc....
John Parsons (123-45-6781) and George Smith (123-45-6782) are 70% and 30% owners, respectively, of Premium, Inc. (11-1111111), a candy company located at 1005 16th Street, Cut and Shoot, TX 77303. Premium's S election was made on January 15, 2010, its date of incorporation. The following information was taken from the company's 2016 income statement.    Interest income $ 100,000 Gross sales receipts 2,410,000 Beginning inventory 9,607 Direct labor (203,102) Direct materials purchased (278,143) Direct other costs (249,356) Ending inventory 3,467...
QUESTION 45 Special issues in measuring service productivity are that the service is a. focused on...
QUESTION 45 Special issues in measuring service productivity are that the service is a. focused on unique individual attributes or desires, and is therefore difficult to standardize. b. often an intellectual task performed by professionals. c. often difficult to automate or mechanize. d. often difficult to evaluate for quality. e. all of the above. QUESTION 46 The Foreign Corrupt Practices Act (FCPA) is the law that a. makes bribing foreign government officials illegal. b. makes it illegal to “dump” products...
The company currently has a target debt–equity ratio of .45, but the industry target debt–equity ratio...
The company currently has a target debt–equity ratio of .45, but the industry target debt–equity ratio is .40. The industry average beta is 1.20. The market risk premium is 8 percent, and the risk-free rate is 6 percent. Assume all companies in this industry can issue debt at the risk-free rate. The corporate tax rate is 40 percent. The project requires an initial outlay of $680,000 and is expected to result in a $100,000 cash inflow at the end of...
Your client John Smith is 45. He wants to retire at the age of 55. He...
Your client John Smith is 45. He wants to retire at the age of 55. He plans to sell his business sometime in the next five years and he is considering using the $100,000 proceeds from the sale to purchase an annuity. Explain to your client what an annuity does. Under what set of circumstances would the annuity be desirable to Smith? If the annuity is purchased, what features should it have with respect to guarantees? If Mr. Smith does...
Your client John Smith is 45. He wants to retire at the age of 55. He...
Your client John Smith is 45. He wants to retire at the age of 55. He plans to sell his business sometime in the next five years and he is considering using the $100,000 proceeds from the sale to purchase an annuity. Explain to your client what an annuity does. Under what set of circumstances would the annuity be desirable to Smith? If the annuity is purchased, what features should it have with respect to guarantees? If Mr. Smith does...
A taxpayer purchases $507,000 worth of property that qualifies for the Section 179 deduction during the...
A taxpayer purchases $507,000 worth of property that qualifies for the Section 179 deduction during the current year. The taxpayer would like to deduct the greatest depreciation expense possible (including the Section 179 deduction) on the property. Indicate how the depreciation expense should be determined: a. An individual b. A corporation c. An S corporation d. A partnership
John F. Mahon's issues management process explain the Mahon's strategy
John F. Mahon's issues management process explain the Mahon's strategy
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT