Question: Barbara buys 100 shares of DEM at 35 a share

Barbara buys 100 shares of DEM at $35 a share and 200 shares of GOP at $40 a share. She buys on margin and the broker charges interest of 10 percent on the loan.
a. If the margin requirement is 55 percent, what is the maximum amount she can borrow?
b. If she buys the stocks using the borrowed money and holds the securities for a year, how much interest must she pay?
c. If after a year she sells DEM for $29 a share and GOP for $32 a share, how much did she lose on her investment?
d. What is the percentage loss on the funds she invested if the interest payment is included in the calculation?

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  • CreatedMarch 19, 2015
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