You want to buy 1,000 shares of AAPL, at $115 a share.

You want to buy 1,000 shares of AAPL, at $115 a share.

What if you purchased those shares with maximum margin?

Your brokerage will charge interest on the amount borrowed, at call money rate.

Let’s say the rate is 8%. If AAPL goes up to $140 in one year. What is your gain in nominal terms and percentage?

What if AAPL stock gone down to $95?

Expert Solution

margin required = 1000 shares * 115 = $115000

Interest charge = 115000*.08 = $9200

If AAPL goes $140 = Total Share Value = 140*1000 = 140000

Profit = 140000-115000-9200 = $15800

if AAPL goes to $95

Share value becomes = 95*1000

Loss = 95000 -115000-9200 = -$29200

jeff jeffy answered 2 years ago

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