Question

In: Finance

An investor borrows $22,000 on margin to buy 1,000 shares in Tamarind, Inc. at $55 per...

An investor borrows $22,000 on margin to buy 1,000 shares in Tamarind, Inc. at $55 per share. The initial margin requirement is 50% while the maintenance margin is 35%.

a.) What is the margin (%) in the account at purchase of the stock?

b.) To what level will the stock price have to fall to generate a margin call?

Solutions

Expert Solution

jeff jeffy answered 8 months ago
Next > < Previous

Related Solutions

An investor purchases 400 shares of Company A at $55 per share.Suppose that the investor...
An investor purchases 400 shares of Company A at $55 per share. Suppose that the investor finances $8,500 of their investment with a margin loan at 7% interest. If the price of one share of Company A falls to $50 in a year, what is the investor’s rate of return?(Do not round intermediate calculations.Negative values should be indicated by a minus sign. Round your answer to 2 decimal places.)An investor purchases 400 shares of Company A at $55 per share....
You've borrowed $22,000 on margin to buy shares in Disney, which is now selling at $44...
You've borrowed $22,000 on margin to buy shares in Disney, which is now selling at $44 per share. Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%. Two days later, the stock price falls to $42.50 per share. a-1. What is the percentage margin on the above transaction? (Round your answer to 2 decimal places.)   Percentage margin % a-2. Will you receive a margin call? Yes No      b. How low can the price...
You've borrowed $22,000 on margin to buy shares in Disney, which is now selling at $44...
You've borrowed $22,000 on margin to buy shares in Disney, which is now selling at $44 per share. Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%. Two days later, the stock price falls to $42.50 per share. a-1. What is the percentage margin on the above transaction? (Round your answer to 2 decimal places.)   Percentage margin % a-2. Will you receive a margin call? Yes No      b. How low can the price...
An investor buys 1,000 shares of Tundra Enterprises, Inc. at $45 1/2 per share. A year...
An investor buys 1,000 shares of Tundra Enterprises, Inc. at $45 1/2 per share. A year later, he sells his entire position at $53 1/4. The firm paid a dividend of $0.75 per share during this period. Based on this information, calculate the investor's realized return
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 Xtel currently is selling at $72 per share. You buy 400 shares using $22,000...
Suppose that Xtel currently is selling at $72 per share. You buy 400 shares using $22,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 9%. a. What is the percentage increase in the net worth of your brokerage account if the price of Xtel immediately changes to: (i) $79.92; (ii) $72; (iii) $64.08? What is the relationship between your percentage return and the percentage change in the...
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 purchased 200 shares of stock at $100 per share on 65% margin. Suppose the...
An investor purchased 200 shares of stock at $100 per share on 65% margin. Suppose the maintance margin is 40% at what price does the investor get a margin call? Regarding the previous question, if the price declines to $70 per share whats the return to the investors equity? What if the stock price rises to $150 per share? ignore interest and transaction costs.
The shares of Salford Ltd are selling for ¢55 per share. Ruth is considering buying 1,000...
The shares of Salford Ltd are selling for ¢55 per share. Ruth is considering buying 1,000 shares of Salford Ltd. Her broker demands brokerage commissions of 2% for purchases and 2% for sales; initial margin deposit of 60% and a maintenance margin of 25%. The interest rate on margin debt is 4% per year. a. Assuming that Ruth paid the full cost of the purchase and the company paid dividends of ¢0.80 per share during the year, what is her...
Alphaget Inc., borrows $1,500,000 at LIBOR plus a lending margin of 1.25 percent per annum on...
Alphaget Inc., borrows $1,500,000 at LIBOR plus a lending margin of 1.25 percent per annum on a three-month rollover basis from a London bank. If three-month LIBOR is 4 ½ percent over the first three-month interval and 5 3/8 percent over the second three-month interval, how much will Alphaget pay in interest over the first year of its Eurodollar loan? Select one: a. $43,057 b. $46,406 c. $47,658 d. $49,432
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT