Question

In: Finance

You decide to buy 100 shares of Chevron (CVX) in a margin account that has an...

You decide to buy 100 shares of Chevron (CVX) in a margin account that has an initial margin of 50%. CVX pays an annual dividend of $4 a share and the stock is currently trading at $100. The cost of borrowing from your broker is 6%. What is your % return if the stock increases to $125 in 1 year? If the next day after you purchase the stock bad news comes out and drops the stock to $90. Will you receive a margin call if the maintenance margin is set at 20%?

please show the work with steps....thanks!

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

MARGIN ACCOUNT. You have a Margin Account. Assume you buy 300 Pfizer (PFE) shares at $140...
MARGIN ACCOUNT. You have a Margin Account. Assume you buy 300 Pfizer (PFE) shares at $140 per share.   You put up $21,000 and borrow the rest. Assume you buy 300 Pfizer (PFE) shares at $140 per share.   You put up $21,000 and borrow the rest. i.     What is the Margin?                                             ii.     How would this be represented in the balance sheet?                                            iii.     Now assume that your margin account requires a maintenance margin of 40%. If PFE is selling for $110, would...
Suppose you buy 100 shares of stock XYZ at $10 a share with a margin of...
Suppose you buy 100 shares of stock XYZ at $10 a share with a margin of 50%. You also buy 200 shares of stock ABC at $50 a share with an 60% margin. You are very sure that, in six month, the price of the first stock would be $15 because you got insider information, but you are not so sure about the price of the second stock. Suppose you want to achieve a 20% return from your portfolio, then...
You buy 100 shares of stock at $20 per share on margin of 40 percent.  If the...
You buy 100 shares of stock at $20 per share on margin of 40 percent.  If the price of the stock rises to $40 per share, what is your percentage gain in equity?  Disregard interest costs. PLEASE TYPE OUT
You want to buy 50 shares of stock at $60 per share. You have a margin account.
  A. You want to buy 50 shares of stock at $60 per share. You have a margin account. The initial margin is 60% and the maintenance margin is 35%. Calculate the maximum amount of cash you may borrow to be able to make this purchase. B. You want to buy 50 shares of stock at $60 per share. You borrow $1,000 on margin. The initial margin is 60% and the maintenance margin is 35%. Calculate the price below which...
1) Assume you buy 100 shares of stock at $40 per share on margin. The initial...
1) Assume you buy 100 shares of stock at $40 per share on margin. The initial margin is 50%. If the price rises to $55 per share, what is your percentage gain on the initial equity?
You open a margin account at Chas Pigeon, a discount broker. You subsequently short 100 shares...
You open a margin account at Chas Pigeon, a discount broker. You subsequently short 100 shares of Exciting.com at $300 per share, believing it to be overpriced. This transaction is done on margin, which has an annual interest rate of 6 percent. Exactly one year later, Exciting has declined to $60 a share, at which point you cover your short position. You pay brokerage costs of $25 on each transaction you make. The margin requirement is 50 percent. (a) Calculate...
Suppose you buy a round lot of Francesca Industries stock (100 shares) on 60 percent margin...
Suppose you buy a round lot of Francesca Industries stock (100 shares) on 60 percent margin when the stock is selling at $35 a share. The broker charges a 14 percent annual interest rate, and commissions are 3 percent of the stock value on the purchase and sale. A year later you receive a $0.50 per share dividend and sell the stock for $47 a share. What is your rate of return on Francesca Industries? Do not round intermediate calculations....
Suppose you buy a round lot of Francesca Industries stock (100 shares) on 60 percent margin...
Suppose you buy a round lot of Francesca Industries stock (100 shares) on 60 percent margin when the stock is selling at $25 a share. The broker charges a 11 percent annual interest rate, and commissions are 2 percent of the stock value on the purchase and sale. A year later you receive a $0.75 per share dividend and sell the stock for $36 a share. What is your rate of return on Francesca Industries? Do not round intermediate calculations....
You buy 700 shares of SUV at $70.63/share on 35% margin. You must deposit to margin...
You buy 700 shares of SUV at $70.63/share on 35% margin. You must deposit to margin _________ Your leverage on this investment is _________
Assume that you buy 200 shares of the Mulligan Corp. on Margin at a price of...
Assume that you buy 200 shares of the Mulligan Corp. on Margin at a price of $75 per share. Your broker requires 60% initial margin and 35% minimum maintenance margin. Assume that instead, you sell short 200 shares of Mulligan at $75 per share with a 50% margin requirement. (7 points total) a) Assume that the price has increased to $88 one month later. What is the remaining equity in your account and what rate of return have you earned...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT