1) Donald puts up $15,000 but borrows an equal amount of money from his broker to...

1) Donald puts up $15,000 but borrows an equal amount of money from his broker to double the amount invested to $30,000. The broker charges 5% on the loan. The stock was originally purchased at $20 per share, and in 1 year the investor sells the stock for $22. The investor's rate of return was ____.

2)

You are bearish on Apple and decide to sell short 100 shares at the current market price of $30 per share.

a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position?

b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.)

Expert Solution

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jeff jeffy answered 1 year ago

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