Given a maintenance margin of 30 per cent, when you buy on margin you must consider...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Given a maintenance margin of 30 per cent, when you buy on margin you must consider how far the share price can fall before you receive a margin call. The computation for our example is as follows. If the price of the share is P and you own 200 shares, the value of your position is 200P and the equity in your account is (200P - $5000). The percentage margin is (200P - 5000)/200P. To determine the price, P, that is equal to 30 per cent (0.30), we use the following equation: 200P-5000 0.30 200P 200P-$5000 = 60P 140P = $5000 P = $35.71 Given a maintenance margin of 30 per cent, when you buy on margin you must consider how far the share price can fall before you receive a margin call. The computation for our example is as follows. If the price of the share is P and you own 200 shares, the value of your position is 200P and the equity in your account is (200P - $5000). The percentage margin is (200P - 5000)/200P. To determine the price, P, that is equal to 30 per cent (0.30), we use the following equation: 200P-5000 0.30 200P 200P-$5000 = 60P 140P = $5000 P = $35.71
Expert Answer:
Answer rating: 100% (QA)
The calculation provided is correct To determine the price P at which ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
You have just been hired by Jamestown Financial Services (JFS) as an investment adviser. Your boss, Susan Canton, must write a report for an important client, so she has decided to give you...
-
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $168,000 and has a 12-year life and no salvage value. The...
-
Viola, Iona and Paula form a joint for the sale of merchandise. Iona and Paula are to contribute the merchandise, Viola is to act as the manager and is to be allowed a bonus of 25% of the profit...
-
Assume that the top globe of a Van de Graff generator (which we can model as a sphere 30 cm in diameter) is charged to the maximum potential of it can have relative to infinity without causing the...
-
The blank for the spool shown in the accompanying figure is to be sand cast out of A-319, an aluminum casting alloy. Make a sketch of the wooden pattern for this part. Include all necessary allowance...
-
What is the place of sales forecasting in the company planning process?
-
Harrys Carryout Stores has eight locations. The firm wishes to expand by two more stores and needs a bank loan to do this. Mr. Wilson, the banker, will finance construction if the firm can present an...
-
A ball is released from rest at the top of an inclined plane, whose length is d = 140 cm. It takes the ball t = 0.70s to roll down to the bottom of the plane. (a) What is the ball's acceleration down...
-
On December 31, 2023, RCA Companys Allowance for Doubtful Accounts had an unadjusted debit balance of $7,800. The accountant for RCA has prepared a schedule of the December 31, 2023, accounts...
-
Discuss the Analog Modulation Technique & Digital Modulation Technique a) The maximum bandwidth is occupied by a. ASK b. BPSK c. FSK d. None of the above b) ASK modulated signal has the bandwidth a....
-
Place the following phrases in an internet search bar and, describe the following. Please provide a citation and reference for each source you use. Feedback and empowerment What does the ability to...
-
How can I find the exact p-value for each coefficient (p>t )column if the number of observations = 52, df numerator is 3, df denominator is 48, t static is there in the third column. I need to know...
-
Briefly explain at least 5 tools and techniques you have learned in the previous classes that are used by operations managers to improve the processes, lower costs and meet the demand of their...
-
How does servant leadership principles, in accordance with the Christian worldview, interact with essential management practices and how does servant leadership influence individual, group, and...
-
complete the following: Find one symbol (or picture, object, icon, artifact) that symbolizes a commitment to success in life or career. Explain why you chose the symbol and how it will help you stay...
-
A web page has two textboxes, the first text box is used to enter the age and the second one is used to enter the experience in years. The form should not be submitted if the age is not a power of 2....
-
Fred Farmer needs to prepare a balance sheet for his bank. He spent the day getting the following information. Fred needs your help to build a balance sheet and evaluate it. The information was...
-
George Rice is reviewing the performance of the portfolio that he has held for the past five years. He has decided to compare his portfolio returns with the market returns measured by the S&P 500...
-
Use the model in File C15 to solve this problem. a. Refer to Problem 15-15. When Bowers analyzed her proposed credit policy changes, she found that they would reduce Muscarellas value and therefore...
-
Would the management of a firm in an oligopolistic industry or in a competitive industry be more likely to engage in socially conscious practices? Explain your reasoning.
-
In your own words ,explain why as sort ativity could be important to System of Systems theory.
-
Design an undirected network with N=7 and L=12. Based on how you drew your network, classify it as either fully connected ,random, or scale-free. Justify your decision with a short paragraph response.
-
Design a network with an average degree of 2.
Study smarter with the SolutionInn App