Question

In: Finance

1. An investor purchases 400 shares at $21.40 a share, holds the stock for 30 weeks,...

1. An investor purchases 400 shares at $21.40 a share, holds the stock for 30 weeks, and then sells the stock for $24.60 a share. Use the commission schedule below from Company A to find the annual rate of interest earned by the investment.

Company A

Principal

Under $3,000

$3,000-$10,000

Over $10,000

Commission

$25 + 1.8% of principal

$37 + 1.4% of principal

$107 + 0.7% of principal

2. Find the annual percentage yield (APY) for money invested at an annual rate of (a) 3.05% compounded quarterly. (b) 2.95% compounded continuously. As an investor what is the preferable interest plan?

Expert Solution

1.Annual rate of interest earned by the investment

Annual rate of interest earned by the investment = 18.86%

2. Annual Percentage Yield (APY)

The Annual Percentage Yield of quarterly compounding is 3.085% which is higher than the Annual Percetage Yield of continuous compounding of 2.994% . Hence, the investor should prefer quarterly compounding of 3.05% as the return is higher.

jeff jeffy answered 2 years ago

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....

An investor holds one share of Tesla stock. The investor purchased the stock at $125. The...

An investor holds one share of Tesla stock. The investor purchased the stock at $125. The current price is now $136. If the investor also purchased an option at the time he bought the share, at a premium of $1, with a strike price of $125, what would the investor prefer to be holding right now? (Please Explain Answer). call option put option either call or put, they have the same profit $0

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%

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

Investor buys 200 shares of stock at $27.25 per share. Investor sells the stock after one...

Investor buys 200 shares of stock at $27.25 per share. Investor sells the stock after one year. 1. What is the dollar amount of gain and the percent of return if the stock is sold for $32.60 per share? How much does the yield percentage increase to if the stock received a per share dividend of $1.15 during the year? 2. What is the dollar amount of loss and percentage of return if the stock received a per share dividend...

An investor purchases 300 shares of ABC stock on margin. The current price of ABC stock...

An investor purchases 300 shares of ABC stock on margin. The current price of ABC stock is $70 per share, the initial margin requirement is 60% and the maintenance margin requirement is 35%. 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 short sold 400 shares of a stock at $51 a share. The initial margin is...

You short sold 400 shares of a stock at $51 a share. The initial margin is 50% and the maintenance margin is 25%. What is the amount of your liability for this transaction as initially shown on your account balance sheet? Select one: a. $7,650 b. $5,100 c. $15,300 d. $10,200 e. $20,400 The answer is d or e? what does it mean initial transaction? The first transaction that is shown on the Liability and Equity?

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?

An investor short sells 200 shares of a stock for $ 68.67 per share. The initial...

An investor short sells 200 shares of a stock for $ 68.67 per share. The initial margin is 53 % , and the maintenance margin is 40 % . The price of the stock rises to $ 81.73 per share. What is the margin, and will there be a margin call? The margin in the account is ______ %. (Round to the nearest percent.) Because the current margin is (equal to, below or above) the maintenance margin, there (will...

When an investor purchases a share of a firm's common stock, what does he or she...

When an investor purchases a share of a firm's common stock, what does he or she receive in return? (Select all that apply.) Multiple select question. A share in the company's future successes and setbacks An ownership share in the firm A guarantee of future dividends A guaranteed constant increase in the market value of the share