4. How do margin trades magnify both the upside potential and downside risk of an investment...
Homework Answers
4. Margin is a type of leverage. The client is made to deposit only a certain amount of money as margin and can gain exposure to more number of shares than what he can actually own through his deposit made. The remainder is financed by the broker, who borrows from the bank and so he charges the trader a certain interest to lend money to him.
Margin trading allows an investor to purchase a stock of value which is more than the amount actually deposited by the investor in his trading account. As the investor deposits just a portion of the total value of the security, the gains are much larger when the price of the security rises relative to the amount of money invested.
If the stock price falls down and the margin account runs low, the trader is supposed to deposit more money as collateral or close the position before the trader account is charged for insolvency. So, in case of margin trading the losses are much larger relative to the amount of money deposited.
Add Answer to:
4.
How do margin trades magnify both the upside potential and downside
risk of an investment...
17 How do margin trades magnify both the upside potential and the downside risk of an...
17 How do margin trades magnify both the upside potential and the downside risk of an investment position? 18.What do you think would happen to the expected return on stocks if investors perceived higher volatility in the equity market? 评阅人 得分 IV. Calculation.(10 points each, 30points) The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation 0.8 30% b 13% A 1.2 40 18 The market index has a standard deviation of 22% and the risk-free...
Compare the mechanics and investment implications of buying on margin and short-selling. Be sure to detail...
Compare the mechanics and investment implications of buying on margin and short-selling. Be sure to detail and provide examples ot illustrate how margin trades magnify both the upside potential and the downside risk of an investment portfolio?
Contrast international portfolio investment and foreign direct investment. How do they relate to risk and ability...
Contrast international portfolio investment and foreign direct investment. How do they relate to risk and ability to control?
The risk-free rate is 0%. The market portfolio has an expected return of 20% and a volatility of 20%. You have $100 to invest. You decide to build a portfolio P which invests in both the risk-free investment and the market portfolio.
The risk-free rate is 0%. The market portfolio has an expected return of 20% and a volatility of 20%. You have $100 to invest. You decide to build a portfolio P which invests in both the risk-free investment and the market portfolio.a. How much should you invest in the market portfolio and the risk-free investment if you want portfolio P to have an expected return of 40%?b. How much should you invest in the market portfolio and the risk-free investment...
questions 29-32 please 29. What strategy could be considered insurance for an investment in a portfolio...
questions 29-32 please
29. What strategy could be considered insurance for an investment in a portfolio of stocks? A. Covered call B. Protective put C. Short put D. Straddle E. None of the above 30. Why is the buyer of an option not required to post margin under the Option Clearing Corporation rules? A. Once an option is purchased, no further money is at risk B. The writer pays all the costs C. The credit worthiness of the buyer covers...
2. Suppose the maintenance margin is $5 and initial margin is $10. A long trader trades...
2. Suppose the maintenance margin is $5 and initial margin is $10. A long trader trades 10 contract in the market. when the Day 2's ending balance is $40/ what should the trader do? a. Do nothing but keep trading in Day 3 b. Deposit extra $10 c. Deposit extra $60 d. deposit extra $100 e. None above 3. Which of the following statement regarding clearing hours in futures market is wrong? a. Clearing house collects margin b. Clearing house...
I am involved in trading and I need a question answered. If I have £800 and I gain 200 pips on 5 trades at a risk of 0.20 a trade how much money do I make a week?
I am involved in trading and I need a question answered. If I have £800 and I gain 200 pips on 5 trades at a risk of 0.20 a trade how much money do I make a week?
Investment Theory 4. Your current portfolio of $750,000 is fully diversified, yielding an expected monthly return...
Investment Theory
4. Your current portfolio of $750,000 is fully diversified, yielding an expected monthly return of 0.67% with a monthly return volatility of 2.37%. You expect to inherit $250,000 of company A stock, which has an expected return of 1.25% a month and a monthly return standard deviation of 2.95%. The correlation of stock A with your current portfolio is 0.4. a. Assuming you keep the stock, compute the monthly expected return and standard deviation of the new portfolio...
Problem 4: - You are a trader who trades both puts and calls on SleazeCo. Information...
Problem 4: You are a trader who trades both puts and calls on SleazeCo. Information about current market conditions is displayed below.$$ \begin{array}{lclcc} \text { Stock Price } & \text { Exercise Price } & \text { Expiration Date } & \text { Call Price } & \text { Put Price } \\ \hline 88 & 90 & 1 / 12^{\text {th }} \text { of a year } & 2.8546 & 4.6032 \\ 88 & 95 & 1 / 12^{\text...
How do you solve for phase margin for both an open and closed loop transfer function...
How do you solve for phase margin for both an open and closed loop transfer function without Matlab?
17 How do margin trades magnify both the upside potential and the downside risk of an investment position? 18.What do you think would happen to the expected return on stocks if investors perceived higher volatility in the equity market? 评阅人 得分 IV. Calculation.(10 points each, 30points) The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation 0.8 30% b 13% A 1.2 40 18 The market index has a standard deviation of 22% and the risk-free...
questions 29-32 please
29. What strategy could be considered insurance for an investment in a portfolio of stocks? A. Covered call B. Protective put C. Short put D. Straddle E. None of the above 30. Why is the buyer of an option not required to post margin under the Option Clearing Corporation rules? A. Once an option is purchased, no further money is at risk B. The writer pays all the costs C. The credit worthiness of the buyer covers...
Investment Theory
4. Your current portfolio of $750,000 is fully diversified, yielding an expected monthly return of 0.67% with a monthly return volatility of 2.37%. You expect to inherit $250,000 of company A stock, which has an expected return of 1.25% a month and a monthly return standard deviation of 2.95%. The correlation of stock A with your current portfolio is 0.4. a. Assuming you keep the stock, compute the monthly expected return and standard deviation of the new portfolio...
Problem 4: You are a trader who trades both puts and calls on SleazeCo. Information about current market conditions is displayed below.$$ \begin{array}{lclcc} \text { Stock Price } & \text { Exercise Price } & \text { Expiration Date } & \text { Call Price } & \text { Put Price } \\ \hline 88 & 90 & 1 / 12^{\text {th }} \text { of a year } & 2.8546 & 4.6032 \\ 88 & 95 & 1 / 12^{\text...
Most questions answered within 3 hours.
-
The denaturation of proteins can be described by the
equilibrium
F⇌U
where F and U represent...
asked 1 hour ago -
Please answer what the maximum and minimum force is, and the
angle on the ion is...
asked 1 hour ago -
implement a program that reads a number of rows and a symbol.
The program will draw...
asked 1 hour ago -
Assume that when adults with smartphones are randomly selected,
45% use them in meetings or classes....
asked 1 hour ago -
Determine the number of formula units of
Na2SO4 and moles of oxygen contained in 8.11
moles...
asked 1 hour ago -
Explain in steps on the following code
What would be the output when executed
using System;...
asked 1 hour ago -
Given the information in the table, which of the following
statements is CORRECT?
Stock A
Stock...
asked 1 hour ago -
Write MARIE assembly language programs that do the following:
Write a program that inputs an integer...
asked 1 hour ago -
Explain an understanding of services and protocols.
Explain the job of DNS.
Explain the three email...
asked 2 hours ago -
(As soon as possible) Balance each of the following equations
according to the half-reaction method:
H2O2(aq)...
asked 2 hours ago -
A thin rod with a mass of 3.5kg and a length L=1.5 m is oriented
horizontally....
asked 2 hours ago -
Inheritance pattern in BRCA 1
Describe the inheritance pattern of BRCA 1 Is it recessive or...
asked 2 hours ago