You have $40,000 to invest in Sophie Shoes, a stock selling for $80 a share. The initial
Question:
You have $40,000 to invest in Sophie Shoes, a stock selling for $80 a share. The initial margin requirement is 60 percent. Ignoring taxes and commissions, show in detail the impact on your rate of return if the stock rises to $100 a share and if it declines to $40 a share assuming:
(a) You pay cash for the stock,
(b) You buy it using maximum leverage.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 58% (17 reviews)
a Assume you pay cash for the stock Number of shares you could purchase 4000080 50...View the full answer
Answered By
Carly Cimino
As a tutor, my focus is to help communicate and break down difficult concepts in a way that allows students greater accessibility and comprehension to their course material. I love helping others develop a sense of personal confidence and curiosity, and I'm looking forward to the chance to interact and work with you professionally and better your academic grades.
4.30+
12+ Reviews
21+ Question Solved
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
Question Posted:
Students also viewed these Accounting questions
-
You find a stock selling for $96.40 that has a dividend yield of 2.8 percent. What was the last quarterly dividend paid?
-
You find a stock selling for $74.20 that has a dividend yield of 3.4 percent. What was the last quarterly dividend paid?
-
To cover the initial margin requirement of 60 percent, you deposited funds after short- selling 100 shares of common stock at $ 45 per share. a. What is your rate of return if you cover at $ 50,...
-
Show that for an integer n > 2, the period of the decimal expression for the rational number is at most n - 1. Find the first few values of n for which the period of - is equal ton- 1. Do you notice...
-
In an advertisement in a local newspaper, Best Food supermarket attempted to convince consumers that it offered them the lowest total food bill. To do this, Best Food presented the following...
-
You want to estimate the value of a company that has three very different lines of business. It manufactures aircraft, is in the data processing business, and manufactures automobiles. How could you...
-
A capacitor has a plate area of \(0.0045 \mathrm{~m}^{2}\) and a charge of magnitude \(q\) on each plate. The space between plates has been filled with a dielectric that has a bound surface charge of...
-
Nelson Company purchased land containing an estimated 2.5 million tons of ore for a cost of $4,400,000. The land without the ore is estimated to be worth $250,000. During its first year of operation,...
-
Your 3 year old nephew got into the workbench and mixed iron filings into a container with sugar and marbles. Explain the steps you would take to separate and recover each substance (use point form...
-
The TCM Petroleum Corporation is an integrated oil company headquartered in Fort Worth, Texas. Historical income statements for 2014 and 2015 are found below (dollar figures are in the millions): In...
-
Briefly discuss the two major functions for the NYSE specialist.
-
Lauren has a margin account and deposits $50,000. Assume the prevailing margin requirement is 40 percent, commissions are ignored, and the Gentry Wine Corporation is selling at $35 per share. a. How...
-
(A) Predict the major product(s) of the mononitration of benzaldehyde, C 6 H 5 CHO. (B) Predict the major product(s) of the mononitration of 1,3-dichlorobenzene.
-
A football is inflated in the locker room before the game. The air warms as it is pumped, so it enters the ball at a temperature of 27C. The ball is inflated to a gauge pressure of 13 psi. The ball...
-
A California geothermal power plant generates 4.3 MW by extracting 24 MW of heat from an underground source at 108C and then discharging waste heat into the 17C air. a. What is the actual efficiency...
-
Some runners train with parachutes that trail behind them to provide a large drag force. These parachutes are designed to have a large drag coefficient. One model expands to a square 1.8 m on a side,...
-
A nerve impulse is propagated across a synapse when the neurotransmitter acetylcholine is released from the pre-synaptic membrane and diffuses across the 20-nm-wide synaptic cleft to the...
-
Swordfish are capable of stunning output power for short bursts. A 650 kg swordfish has a cross-section area of 0.92 m 2 and a drag coefficient of 0.0091exceptionally low due to a number of...
-
Name the type of fault rock shown in Fig. G-52a, and explain what features you used to identify it. The protolith of this rock was a coarse-grained granite. The irregularly shaped, light-colored...
-
Doorharmony Company makes doorbells. It has a weighted- average cost of capital of 5% and total assets of $ 5,900,000. Doorharmony has current liabilities of $ 750,000. Its operating income for the...
-
Which of the following generally is not considered something of value? 1. Cash, money or checks 2. Airline miles or hotel credits associated with frequent activity (e.g., frequent flier miles) 3. An...
-
On January 1, 2010, Valuation Allowance for Trading Investments has a credit balance of $1,200. On December 31, 2010, the cost of the trading securities portfolio was $99,600, and the fair value was...
-
On January 1, 2010, Valuation Allowance for Available-for-Sale Securities has a debit balance of $1,500. On December 31, 2010, the cost of the available-for-sale securities was $67,500, and the fair...
-
On January 1, 2010, Valuation Allowance for Available-for-Sale Securities has a credit balance of $3,400. On December 31, 2010, the cost of the available-for-sale securities was $35,700, and the fair...
-
10. The probability that automobile sales will increase next month (A) is estimated to be 0.40. The probability that the sale of replacement parts will increase (R) is estimated to be 0.50. The...
-
You are trying to prepare financial statements for Bartlett Pickle Company, but seem to be missing its balance sheet. You have Bartlett's income statement, which shows sales last year were $630...
-
Custom Cabinetry has one job in process (Job 120) as of June 30; at that time, its job cost sheet reports direct materials of $6,400, direct labor of $3,400, and applied overhead of $2,890. Custom...
Study smarter with the SolutionInn App