Suppose that XYZ currently is trading at $20 per share. You buy 1,000 shares using $15,000...
Suppose that XYZ currently is trading at $20 per share. You buy 1,000 shares using $15,000 of your own money, borrowing the remainder of the purchase cost from your broker. The rate on the margin loan is 8%.
a) What is your rate of return if the price of XYZ immediately changes to $22?
b) With the same information on stock XYZ and your initial margin above, assume a year has passed. How low can XYZ's price per share fall before you get a margin call if the maintenance margin is 25%?
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Suppose that XYZ currently is trading at $20 per share. You buy
1,000 shares using $15,000...
11. Suppose that Intel currently is selling at $40 per share. You buy 500 shares using...
11. Suppose that Intel currently is selling at $40 per share. You buy 500 shares using $15,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on n/bkm the margin loan is 8% a. What is the percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to: (i) $44; (ii) $40; (iii) $362 What is the relationship between your percentage return and the percentage change...
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Indexes & Trading
1. The price of Facebook stock is currently at $56.51
and you decide to buy 160 shares on margin. You borrow $1,500
from your broker and finance the remainder of the purchase with
your own cash.
a. What is your margin (as a decimal value)?
b. If the price rises to $60, and the interest you
have to pay on the broker's loan is 3%, what is the net return
(as a decimal value)?
c. If the...
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Indexes & Trading
1. The price of Facebook stock is currently at $56.51
and you decide to buy 160 shares on margin. You borrow $1,500
from your broker and finance the remainder of the purchase with
your own cash.
a. What is your margin (as a decimal value)?
b. If the price rises to $60, and the interest you
have to pay on the broker's loan is 3%, what is the net return
(as a decimal value)?
c. If the...
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