1) A stock was purchased for $45 a share and sold ten months later for $48 a share. If the shares were purchased totally with cash the holding period return would be ________ percent as compared to ________ percent if the purchase was made using 70 percent margin. Ignore trading costs and margin interest.2 pts Show work below.

 

 

 

2) Eight months ago, Freda purchased 500 shares of stock on margin at a price per share of $35. The initial margin requirement on her account is 70 percent and the maintenance margin is 40 percent. The call money rate is 4.75 percent and she pays 2 percent above that rate. Today, she sold these shares for $37.50 each. What is her annualized rate of return? 2pts. Show All work.

 

 

 

Practice Questions

 

3) Three months ago, Trevor purchased 500 shares of stock at a cost per share of $64.20. The purchase was made on margin with an initial margin requirement of 65 percent. Trevor pays 1.6 percent over the call money rate of 4.8 percent. What will his total dollar return be on this investment if he sells his shares today at a price per share of $63.40? Ignore dividends.

 

 

 

4) Todd has a margin account with $17,400 in available cash. The initial margin is 70 percent and the maintenance margin is 30 percent. What is the maximum number of shares he can purchase if the price per share is $44?

 

Answer rating: 100% (QA)

If the stock was purchased for 45 and sold for 48 ten months later the holding period return would be Holding period return Ending price Beginning price Beginning price 100 Holding period return 48 45 ... View the full answer