Suppose the current price of a Firm is $19.50. You have $10,725 of your own money that

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Suppose the current price of a Firm is $19.50. You have $10,725 of your own money that you want to invest in the company. Consider two alternative investments:

a. You purchase on margin, where the IM (Initial margin) is 50% and the MM (Maintenance Margin) is 30%. The call rate (including the spread) is 9.25%. You take full advantage of the margin.

b. You purchase with a cash account.

Calculate the return for each (a and b), given the two following scenarios, and compare.

If the stock price at the end of 1 year is $22.45, what is your HPR with each investment?

If the stock price at the end of 1 year is $16.85, what is your HPR with each investment?

Posted Date: Nov 17, 2021 01:54 AM

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Suppose the current price of a Firm is $19.50. You have $10,725 of your own money that

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1 HPR price 2245 and sell price buy price interest investment 2245 1950 01950 a paid ... View the full answer

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