Question

In: Finance

An investor sells short 500 shares of ABC Corporation on June 1, at a time when...

An investor sells short 500 shares of ABC Corporation on June 1, at a time when the price per share is $120. The position is closed out 3 months later, August 31, when the price per share is $100. A dividend of $4 per share was paid July 31, one month before the short position is closed out.

Suppose that the investor must open a margin account at the time the short position is taken. The margin required is 50% of the value of the stock sold short. The investor also earn 1% per month, compounded monthly, on the margin account. Find the investor's 3-month rate of return on the investment.

answer: 29.63%

Solutions

Expert Solution


Related Solutions

An investor sells short 100 shares of XYZ stock at $62 and sells 1 XYZ Oct...
An investor sells short 100 shares of XYZ stock at $62 and sells 1 XYZ Oct 60 put @$6. The maximum potential gain is: (Show your work).
An investor’s portfolio currently is worth $1 million. During the year, the investor sells 500 shares...
An investor’s portfolio currently is worth $1 million. During the year, the investor sells 500 shares of FedEx at a price of $180 per share and 3,000 shares of Cisco at a price of $30 per share. The proceeds are used to buy 1,000 shares of IBM at $160 per share. a. What is the portfolio turnover rate? b. If the shares in FedEx originally were purchased for $140 each and those in Cisco were purchased for $20, and the...
An investor sells short 1,000 shares of The Goldman Sachs Group (GS) at a price of...
An investor sells short 1,000 shares of The Goldman Sachs Group (GS) at a price of $200 per share. a. How much is his required initial equity given margin requirements of 60%? c. (instead of b) Assuming a 25% maintenance margin, at what price will the investor get a margin call, and how much cash would he need to put up?
An investor short sells 200 shares of a stock for $ 68.67 per share. The initial...
An investor short sells 200 shares of a stock for $ 68.67 per share. The initial margin is 53 % ​, and the maintenance margin is 40 % . The price of the stock rises to $ 81.73 per share. What is the​ margin, and will there be a margin​ call? The margin in the account is ______ ​%. ​ (Round to the nearest​ percent.) Because the current margin is (equal to, below or above) the maintenance​ margin, there (will...
An investor bought 500 shares of PanSac International when it was selling for $80 a share...
An investor bought 500 shares of PanSac International when it was selling for $80 a share and sold the shares one year later for $95.48. PanSac paid $3 per share in dividends. Calculate the investor’s actual rate of return.
1. An investor purchases 200 shares of ABC stock on margin. The current price of ABC...
1. An investor purchases 200 shares of ABC stock on margin. The current price of ABC stock is $85 per share, the initial margin requirement is 60% and the maintenance margin requirement is 25%. A)   What is the dollar amount of the loan the investor receives from her broker for this margin purchase? B)   How far can the stock price fall before the investor gets a margin call
An investor sells short 500 shares of Microsoft at $100 per share on February 2, 2018. On February 23, 2018, Microsoft pays a $1 per share dividend.
An investor sells short 500 shares of Microsoft at $100 per share on February 2, 2018. On February 23, 2018, Microsoft pays a $1 per share dividend. The short seller pays $500 to the lender of the stock. The lender closes the short sale by purchasing 500 shares at $100 per share and delivers those shares to the lender on March 15, 2018 to close the short sale.a. The lender is a corporation. Does it get the dividends received deduction...
An investor purchased 300 shares of ABC Company when it IPO’d at $30 per share. Two...
An investor purchased 300 shares of ABC Company when it IPO’d at $30 per share. Two years later, the company executed a 3 for 2 stock split when the shares were trading at $45. One year after that, the investor sold 200 shares at $40. What is her profit on the sale? a$2,000 b$2,500 c$3,000 d$4,000
4. Bernice buys shares of stock in ABC Corporation for $400,000. She sells the stock to...
4. Bernice buys shares of stock in ABC Corporation for $400,000. She sells the stock to her daughter, Henrietta, for $300,000. How much loss did Bernice realize on the sale? How much loss did Bernice recognize? Henrietta sells the stock two years after receiving it. What are Henrietta’s realized and recognized gains/losses if Henrietta sells the stock for $100,000, $250,000 or $600,000? If you were going to submit an argument to Congress to change these rules, what would your best...
1) Understand how un-realized Gains or Losses are handled when investor(I) sells shares in an Investee(IE)...
1) Understand how un-realized Gains or Losses are handled when investor(I) sells shares in an Investee(IE) company?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT