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Use the following data for questions 8-11. Assume an initial margin requirement of 55% and maintenance...

Use the following data for questions 8-11. Assume an initial margin requirement of 55% and maintenance margin of 40%. An investor has $5,500 in cash and wishes to purchase ABC stock. ABC is currently trading at $100 per share and your broker charges 7.5% interest on margin loans for the period.

1- What is the return on equity of the margin position after one year when price rises to $120?

2-What is the return on equity of the margin position after one year when price falls to $80?

3-At what price would you receive a margin call (ignore the interest on margin loan)?

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jeff jeffy answered 1 year ago
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