Question

Sara purchased 50 shares of Apple stock at $190.97 per share using the prevailing minimum initial margin requirement of 55%.

She held the stock for exactly 4 months and sold it without any brokerage costs at the end of that period. During the 4​-month holding​ period, the stock paid $1.49 per share in cash dividends.

Sara was charged 4.8% annual interest on the margin loan. The minimum maintenance margin was 25%.

a. Calculate the initial value of the​ transaction, the debit balance​, and the equity position on​ Sara's transaction. Round to the nearest cent

b. For each of the following share​ prices, calculate the actual margin​ percentage, and indicate whether​ Sara's margin account would have excess​ equity, would be​ restricted, or would be subject to a margin​ call: ​(1)$174.81​, (2)$206.54​,and​(3)$122.35. Round to the nearest .001%

c. Calculate the dollar amount of​ (1) dividends received and​(2) interest paid on the margin loan during the 4​-month holding period. Round to the nearest cent

d. Use each of the following sale prices at the end of the 4​-month holding period to calculate​ Sara's annualized rate of return on the Apple stock​ transaction: (1)$185.83​, (2) $195.99​, and​ (3)$205.89. Round to the nearest .001%

Answer 1