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.)

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jeff jeffy answered 1 year ago

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