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Given the following information, The margin requirement=50%. The margin call ratio = 30%. Stock price: $...

Given the following information,

The margin requirement=50%.

The margin call ratio = 30%.

Stock price: $ 60

            Interest rate on margin borrowing (call rate): 5%

            Expected dividend: $2

                                    Holding period: 1 year

What are...

1) the margin trading return if the stock price increases to $80

2) the margin trading return if the stock price decreases to $45

3) the price which triggers the margin call.

4) If the margin-call triggering price is $25, please estimate the margin requirement, given everything else equal.

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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