Question
In: Finance
Suppose that LMN stock currently is selling at $48 per share. You buy 400 shares using...
Suppose that LMN stock currently is selling at $48 per share.
You buy 400 shares using $14,000 of your own money, borrowing the
remainder of the purchase price from your broker. The rate on the
margin loan is 5%.
a. What is the percentage increase in the net
worth of your brokerage account if the price of LMN
immediately changes to: (i) $51.36; (ii) $48; (iii)
$44.64? What is the relationship between your percentage return and
the percentage change in the price of LMN? (Leave no cells
blank - be certain to enter "0" wherever required. Negative values
should be indicated by a minus sign. Round your answers to 2
decimal places.)
b. If the maintenance margin is 25%, how low can
LMN's price fall before you get a margin call? (Round your
answer to 2 decimal places.)
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS,
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jeff jeffy answered 1 year agoRelated Solutions
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