$28.$ Last week, Miss Bannerman asked her stockbroker to immediately buy $5,000$ shares of the equity stock of Ponzo Illusions at the ruling market price for her. The broker was able to acquire all the $5,000$ shares ordered at GHS$5\mathrm{.}50$ each. She financed the purchase with a loan of GHS$12,000$ from the broker and her own money. The broker demands interest on the loan at the rate of $24\%$ per annum. Required:

$($a$)$ Compute the initial margin.

$($b$)$ Suppose the maintenance margin is $40\%$ and the price of the stock falls to GHS$4\mathrm{.}80$ by the end of this week. Would she receive a margin call?

$($c$)$ Suppose the stock price increases by GHS$1\mathrm{.}20$ and the stock pays a dividend of GHS$0\mathrm{.}10$ per share. Compute the rate of return on the investment.

Answer rating: 100% (QA)

a To compute the initial margin we first need to calculate the total cost of purchasing the shares T... View the full answer