Question

Barbara buys 130 shares of DEM at $33.00 a share and 190 shares of GOP at $37.00 a share. She buys on margin and the broker charges interest of 7 percent on the loan.

1. If the margin requirement is 42 percent, what is the maximum amount she can borrow? Round your answer to the nearest cent.

   $  

2. If she buys the stocks using the borrowed money and holds the securities for a year, how much interest must she pay? Round your answer to the nearest cent.

   $  

3. If after a year she sells DEM for $22.00 a share and GOP for $30.00 a share, how much did she lose on her investment? Use a minus sign to enter the amount as a negative value. Round your answer to the nearest cent.

   $  

4. What is the percentage loss on the funds she invested if the interest payment is included in the calculation? Use a minus sign to enter the amount as a negative value. Round your answer to two decimal places.

     %

Answer 1

1.
=(130*330+190*37)*(1-42%)=28959.4

2.
=(130*330+190*37)*(1-42%)*7%=2027.158

3.
=130*(22-33)+190*(30-37)-(130*330+190*37)*(1-42%)*7%=-4787.158

4.
=(130*(22-33)+190*(30-37)-(130*330+190*37)*(1-42%)*7%)/((130*330+190*37)*42%)=-22.8279496056384%