Question

Bob Orleans invested $3.000 and borrowed $3,000 to purchase shares in Verizon Communications. At the time of his investment Verizon was selling for $47 a share a. Bob paid a commission of $30, how many shares could he buy if he used only his own money and did not use margin? (Round your answer to 1 decimal place.) Number of shares b. Bob paid a commission of 560, how many shares could he buy if he used his $3,000 and borrowed $3.000 on margin to buy Verizon stock? (Round your answer to 1 decimal place.) Number of shares | C. Assume Bob dild use margin and paid a commission of $60 to buy his Verizon stock. Also, assume he pald another $60 to sell his stock and sold the stock for $54 a share. How much profit did he make on his Verizon stock investment? (Use the rounded number of shares computed in part b. Round your answer to 2 decimal places.)

Answer 1

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Invested amount 3000 Commission paid 30 Purchase price of share 47 No of Share would be bought if he used only his invested capital (3000-30) 2970 No of Shares (2970/47) 63.2 3000 3000 60 Invested amount Margin Commission paid on purchase Purchase price of share Total Fund Avaiable (3000+ 3000-60) Share buy using invested + Margin Fund No of Shares (2970/47) 47 5940 126.4 Sales proceed (126.4* 54) (Less Commission) Net proceed (Less Cost of Purchase) (Less Commission paid while purchase) Net profit 6825.6 -60 6765.6 5940 60 765.60