You purchased 100 shares of Chipotle Mexican Grill, Inc. (CMG) common stock on margin at $431.79...

Question

Question

You purchased 100 shares of Chipotle Mexican Grill, Inc. (CMG) common stock on margin at

$431.79 per share. Assume the initial margin is 50% and the maintenance margin is 30%. One

year later, the stock price closes at $837.11. If the broker’s call loan rate is 2.00%, what is your

return on equity?

Answer 1

Answer #1

Equity = Initial margin = 431.79 * 100 * 50% = 21,589.50

Broker's Loan = Remaining 50% = 21589.50

Interest on call loan = 21589.50 * 2% = 431.79

Net Gain = Number of shares * ( Closing stock price - Purchase price ) - Interest on call loan

= 100 * ( 837.11 - 431.79 ) - 431.79

= 100 * 405.32 - 431.79

= 40100.21

Return on Equity = Net Gain / Equity * 100

= 40100.21 / 21,589.50 * 100

= 185.74 %

Add a comment

Answer 2

Similar Homework Help Questions

You purchased 100 shares of Facebook, Inc. common stock on margin at $169.25 per share. Assume...

You purchased 100 shares of Facebook, Inc. common stock on margin at $169.25 per share. Assume the initial margin is 50% and the maintenance margin is 30%. One year later, the stock price closes at $172.58. If the broker’s call loan rate is 2.00%, what is your return on equity? Note that Facebook pays no dividends.
You sold short 100 shares of Macy's, Inc. common stock on margin at $29.78 per share....

You sold short 100 shares of Macy's, Inc. common stock on margin at $29.78 per share. Assume the initial margin is 50% and the maintenance margin is 30%. One year later, the stock price closes at $17.00, and it has paid cash dividends of $1.51 per share. What is your return on equity? Ignore margin interest.
You sold short 100 shares of Kraft Heinz Co. common stock on margin at $83.55 per...

You sold short 100 shares of Kraft Heinz Co. common stock on margin at $83.55 per share. Assume the initial margin is 50% and the maintenance margin is 30%. One year later, the stock price closes at $59.61, and it has paid cash dividends of $2.50 per share. What is your return on equity? Ignore margin interest.

You purchased 50 shares of PPI common stock on margin at $100 per share. Assume the...

You purchased 50 shares of PPI common stock on margin at $100 per share. Assume the initial margin is 60% and the maintenance margin is 30%. Below what stock price level by the year end would you get a margin call? The call loan rate is 2% per year. O a) $49.67 Ob) $58.29 O c) $44.97 O d) $52.86
You purchased 100 shares of IBM common stock on margin at $70 per share. Assume the initial margin is 50% and the m...

You purchased 100 shares of IBM common stock on margin at $70 per share. Assume the initial margin is 50% and the maintenance margin is 30%. 1) Below what stock price level would you get a margin call? Assume the stock pays no dividend; ignore interest on margin. (15 pts) 2) Suppose that, unfortunately, the stock price drops to $48. You decide to put some additional cash to restore the margin. How much cash you need to inject to restore...
You purchased 200 shares of CNX common stock on margin at $51 per share. Assume the...

You purchased 200 shares of CNX common stock on margin at $51 per share. Assume the initial margin is 50% and the maintenance margin is 34%. You will get a margin call if the stock drops below ________. Assume the stock pays no dividends, and you pay no interest on the margin loan. PLEASE SHOW WORK

You are bearish on a technology stock and decide to sell short 100 shares at the...

You are bearish on a technology stock and decide to sell short 100 shares at the current market price of $36.00 per share. a.) How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position b.) How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short...
Allan purchased 500 shares of stock on margin for $31.75 a share and sold the shares...

Allan purchased 500 shares of stock on margin for $31.75 a share and sold the shares five months later for $34.50 a share. The initial margin requirement was 65 percent and the maintenance margin was 30 percent. The interest rate on the margin loan was 8.5 percent. He received no dividend income. What was his holding period return?
You purchased 1,200 shares of stock on margin for $53 per share and sold the shares...

You purchased 1,200 shares of stock on margin for $53 per share and sold the shares 3 months later for $58.60 per share. The initial margin requirement was 55 percent and the maintenance margin was 35 percent. The interset rate on the margin loan was 8 percent. You received no dividend income. What was your holding period return?

Question 19 (8 POINTS) Assume you sold short 100 shares of common stock at margin is...

Question 19 (8 POINTS) Assume you sold short 100 shares of common stock at margin is 60% shares of common stock at $50 per share. The initial a) What would be the maintenance margin if a margin call is made at a stock of $602 b) What is the maximum potential loss for a short seller? Briefly explain.