3. You are bullish on ITC stock. The current market price is $100 per share, and...
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3. You are bullish on ITC stock. The current market price is $100 per share, and you have $400,000 of your own to invest. You borrow an additional $800,000 from your broker at an interest rate of 3% per week and invest $1,200,000 in the stock. ITC pays no dividends. a. Suppose the price of ITC stock falls immediately after your purchase. The maintenance margin is 30%. How low can the price of ITC stock fall before you receive a margin call? b. After 2 weeks, calculate your rate of return if the price of ITC stock has gone up by 20%? (10 marks) 3. You are bullish on ITC stock. The current market price is $100 per share, and you have $400,000 of your own to invest. You borrow an additional $800,000 from your broker at an interest rate of 3% per week and invest $1,200,000 in the stock. ITC pays no dividends. a. Suppose the price of ITC stock falls immediately after your purchase. The maintenance margin is 30%. How low can the price of ITC stock fall before you receive a margin call? b. After 2 weeks, calculate your rate of return if the price of ITC stock has gone up by 20%? (10 marks)
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a To determine how low the price of ITC stock can fall before receiving a margin call we need to cal... View the full answer
Related Book For
Investments
ISBN: 978-0071338875
8th Canadian Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus, Stylianos Perrakis, Peter
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