Suppose that you sell short 1,000 shares of Xtel, currently selling for $60 per share, and...

Suppose that you sell short 1,000 shares of Xtel, currently selling for $60 per share, and give your broker $45,000 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) $66; (ii) $60; (iii) $54? Assume that Xtel pays no dividends.

b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? (Round your answer to 2 decimal places.)

c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $2 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)

Solutions

Expert Solution

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

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

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...

Suppose that you sell short 200 shares of Xtel, currently selling for $80 per share, and...

Suppose that you sell short 200 shares of Xtel, currently selling for $80 per share, and give your broker $10,000 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) $85; (ii) $80; (iii) $75? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required. Negative values...

Suppose that you sell short 200 shares of Xtel, currently selling for $50 per share, and...

Suppose that you sell short 200 shares of Xtel, currently selling for $50 per share, and give your broker $6,000 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) $56; (ii) $50; (iii) $45? Assume that Xtel pays no dividends. b. If the maintenance margin is 25%, how high can Xtel’s price rise before...

Suppose that you sell short 200 shares of Xtel, currently selling for $50 per share, and...

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...

Suppose that you sell short 1,000 shares of Intel, currently selling for $20 per share, and...

Suppose that you sell short 1,000 shares of Intel, currently selling for $20 per share, and give your broker $15,000 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) $22; (ii) $20; (iii) $18? Assume that Intel pays no dividends. b. If the maintenance margin is 25%, how high can Intel’s price rise before...

Problem 3-12 Suppose that you sell short 250 shares of Xtel, currently selling for $100 per...

Problem 3-12 Suppose that you sell short 250 shares of Xtel, currently selling for $100 per share, and give your broker $15,000 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) $115; (ii) $100; (iii) $95? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required....

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 XYZ, currently selling for $40 per share, and...

Suppose that you sell short 500 shares of XYZ, currently selling for $40 per share, and give your broker $15,000 to establish your margin account. If you earn no interest on the funds in your margin account, and assume that XYC pays no dividends. a.) So what will be your rate of return after one year if XYZ stock is selling at: i.) $44.00 ii.) $40.00 iii.) $36.00 b.) If the maintenance margin is 25%, how high can XYZ’s price...

Suppose that you sell short 300 shares of CYSCO (CY), currently selling for $90 per share,...

Suppose that you sell short 300 shares of CYSCO (CY), currently selling for $90 per share, and give your broker $20,000 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 CY stock is selling at $98? Assume that CY pays no dividends. b. If the minimum margin is 30 percent, how high can CY’s price rise before you get a...

Subjects