Assume that you buy 200 shares of the Mulligan Corp. on Margin at a price of...

Assume that you buy 200 shares of the Mulligan Corp. on Margin at a price of $75 per share. Your broker requires 60% initial margin and 35% minimum maintenance margin.

Assume that instead, you sell short 200 shares of Mulligan at $75 per share with a 50% margin requirement. (7 points total)

a) Assume that the price has increased to $88 one month later. What is the remaining equity in your account and what rate of return have you earned on the initial investment?

b) Now do the same as in part a assuming the price has fallen to $54 per share.

c) If the minimum maintenance margin on the short sale is 30%, at what stock price would a margin call be made?

Solutions

Expert Solution

jeff jeffy answered 1 month ago

Next > < Previous

Related Solutions

Assume that you will buy stock on margin (i.e.; stock margin trading). Assume that Texas Instruments Corp...

Assume that you will buy stock on margin (i.e.; stock margin trading). Assume that Texas Instruments Corp stock is currently selling for $50 per share. Assume that you will purchase 500 shares on July 29, 2002 at 11:00 AM. You have $15,000 of your own to invest and you will borrow an additional $10,000 from your broker at an interest rate of 10% per year. Assume that the Maintenance Margin is 40%. 17) Which of the following presents the balance sheet if the stock...

MARGIN ACCOUNT. You have a Margin Account. Assume you buy 300 Pfizer (PFE) shares at $140...

MARGIN ACCOUNT. You have a Margin Account. Assume you buy 300 Pfizer (PFE) shares at $140 per share. You put up $21,000 and borrow the rest. Assume you buy 300 Pfizer (PFE) shares at $140 per share. You put up $21,000 and borrow the rest. i. What is the Margin? ii. How would this be represented in the balance sheet? iii. Now assume that your margin account requires a maintenance margin of 40%. If PFE is selling for $110, would...

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?

Megan bought 200 shares of stock at a price of $10 a share, using a margin...

Megan bought 200 shares of stock at a price of $10 a share, using a margin loan of 30%. The maximum margin loan allowed by the margin lender is 60%. Megan sold her shares after a year for $12 a share. Using the information above to answer THE questions Ignoring margin interest and trading costs, what is Megan’s return on investor’s equity for this investment? A. 67%. B. 29%. C. 14%. D. 10%. Ignoring margin interest and trading...

Assume you sell short 100 shares of Shell Corp. at $100 per share, with initial margin...

Assume you sell short 100 shares of Shell Corp. at $100 per share, with initial margin at 45%. The minimum margin requirement is 30%. The stock will pay no dividends during the period, and you will not remove any money from the account before making the offsetting transaction. At what price would you face a margin call? If the price is $110 at the end of the period, what is your margin ratio at that point?

You buy 700 shares of SUV at $70.63/share on 35% margin. You must deposit to margin...

You buy 700 shares of SUV at $70.63/share on 35% margin. You must deposit to margin _________ Your leverage on this investment is _________

1. An investor purchases 200 shares of ABC stock on margin. The current price of ABC...

1. An investor purchases 200 shares of ABC stock on margin. The current price of ABC stock is $85 per share, the initial margin requirement is 60% and the maintenance margin requirement is 25%. A) What is the dollar amount of the loan the investor receives from her broker for this margin purchase? B) How far can the stock price fall before the investor gets a margin call

You execute a margin purchase of 200 shares of a stock at $52 per share. The...

You execute a margin purchase of 200 shares of a stock at $52 per share. The initial margin requirement is 60% and the maintenance margin is 35%. a. On a per share basis, what is the minimum amount you must you put up and how much can you borrow from the brokerage house? b. If the price of the stock increases to $64 per share, what is the actual margin in your account? Assume you borrowed the...

a) Suppose that you buy 200 shares of XYZ at $80 per share and that you...

a) Suppose that you buy 200 shares of XYZ at $80 per share and that you finance $6,000 of your investment with a margin loan at 6% interest. What is your initial margin? b) Suppose that you buy 200 shares of XYZ at $80 per share and that you finance $6,000 of your investment with a margin loan at 6% interest. If the price of one share of Company XYZ goes up 8% over the course of a year, what...

Suppose you buy 100 shares of stock XYZ at $10 a share with a margin of...

Suppose you buy 100 shares of stock XYZ at $10 a share with a margin of 50%. You also buy 200 shares of stock ABC at $50 a share with an 60% margin. You are very sure that, in six month, the price of the first stock would be $15 because you got insider information, but you are not so sure about the price of the second stock. Suppose you want to achieve a 20% return from your portfolio, then...

Subjects