Shakee Venture wants to purchase 1,000 shares of an Internet technology stock for $15 a share. She figures that she needs $15,000 plus $90 brokerage commission to purchase or sell the stock. She currently has $8,000 of liquidity in her money market account.
a. What can Shakee borrow on margin in order to make the transaction?
b. If the stock jumps to $50 per share within a week, how much will Shakee realize in profit after paying her broker?
c. If the stock dropped to $5 per share, rather than increasing to $50, and the broker put in the margin call, how much must Shakee pay the broker?
d. Based on beginning account balance of $8,000, what is Shakee’s loss?