You have $40,600 to invest in Sophie Shoes, a stock selling for $70 a share. The...

You have $40,600 to invest in Sophie Shoes, a stock selling for $70 a share. The initial margin requirement is 75 percent. Do not round intermediate calculations. Round your answers to two decimal places. Use a minus sign to enter negative values, if any.

Ignoring taxes and commissions, calculate your rates of return if the stock rises to $80 a share and if it declines to $35 a share assuming you pay cash for the stock.
Rate of return if the stock rises to $80 a share: %

Rate of return if the stock declines to $35 a share: %
Ignoring taxes and commissions, calculate your rates of return if the stock rises to $80 a share and if it declines to $35 a share assuming you buy it using maximum leverage.
Rate of return if the stock rises to $80 a share: %

Rate of return if the stock declines to $35 a share: %

Expert Solution

jeff jeffy answered 2 months ago

Suppose XYZ Corp stock is currently selling for $40 a share. You invest $10,000 of your...

Suppose XYZ Corp stock is currently selling for $40 a share. You invest $10,000 of your own money to buy on margin. The initial margin rate is 60% and the minimum maintenance margin is 30%. The interest rate on margin loan is 8%. The stock paid $1 in dividends per share and you paid $0.50 per share as commission. 1. If the stock price increases to $52 after one year, show the T-Account calculations for Margin calculations and calculate your...

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%

The common stock of GVK Ltd. is currently selling for Rs. 70 per share. Dividend per...

The common stock of GVK Ltd. is currently selling for Rs. 70 per share. Dividend per share has grown from Rs. 2 to the current level of Rs. 6 over the past ten years and this dividend growth is expected to continue in future also. What is the required rate of return of the GVK Ltd. ?

You purchased 1,000 shares of stock at $42 a share. The stock is currently selling for...

You purchased 1,000 shares of stock at $42 a share. The stock is currently selling for $45 a share. The initial margin was 70 percent and the maintenance margin is 30 percent. What is your current margin position?

Say you have $10,000 to invest and you invest $4,000 in stock A and the rest...

Say you have $10,000 to invest and you invest $4,000 in stock A and the rest in stock B. You know that the expected returns of stocks A and B are .2 and .1, respectively. If the correlation coefficient between the returns of the two assets is .67, find out the expected portfolio returns a. 15% b. 14% c. 16% d. Can not be determined

If you have $100,000 to invest in the share market today, how would you invest? Please...

If you have $100,000 to invest in the share market today, how would you invest? Please describe your approach in general and explain the relevant finance concepts/theories you have applied. Your answer should be based on what you have learned in this course (no further research is required). You do not need to specify the exact stocks you will invest in (write no more than 200 words).

1) a) You invest in a stock that has a share price of $26.05. In one...

1) a) You invest in a stock that has a share price of $26.05. In one year, that price per share is now $44.15. Each share issued a dividend of $2.17. What was your total return (in dollars)? b) Starbucks has a beta of 1.26. If the expected market return is 4% and the risk free rate is 2%, what is the expected return for Starbucks? Write your answer in percent form, round to two decimal places

abc company's stock is currently selling at $100 per share. you have 12000 in your pocket...

abc company's stock is currently selling at $100 per share. you have 12000 in your pocket but want to buy 200 shares. you can borrow the remainder of the purchase price from your broker at an annual rate of 5% the margin loan. a. What happens to your net worth(i.e.return) in your brokerage account if the price of abc company increases to $100 after one year? b.If the maintenance margin is 30%, how low can abc's price drop in one...

Suppose that you sell short 500 shares of Intel, currently selling for $70 per share, and...

Suppose that you sell short 500 shares of Intel, currently selling for $70 per share, and give your broker $25,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Intel stock is selling at: (i) $74; (ii) $70; (iii) $66? Assume that Intel pays no dividends. (i) Rate of return % (ii) Rate of return % (iii)...

Suppose that you sell short 500 shares of Xtel, currently selling for $70 per share, and...

Suppose that you sell short 500 shares of Xtel, currently selling for $70 per share, and give your broker $25,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $74; (ii) $70; (iii) $66? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required. Negative values...

Question