5. Suppose Stock XYZ is selling at $40 per share. You buy 10,000 shares, using $180,000...
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5. Suppose Stock XYZ is selling at $40 per share. You buy 10,000 shares, using $180,000 of own money, and borrow the remainder. The rate on the margin loan is 6% per year your a. What is your total return on the investment if in 12 months, the price changes to $37, $40, $43 per share. b. c. If the maintenance margin is 25%, at what price will you get a margin call? What if you only used 100,000 of your own money? 5. Suppose Stock XYZ is selling at $40 per share. You buy 10,000 shares, using $180,000 of own money, and borrow the remainder. The rate on the margin loan is 6% per year your a. What is your total return on the investment if in 12 months, the price changes to $37, $40, $43 per share. b. c. If the maintenance margin is 25%, at what price will you get a margin call? What if you only used 100,000 of your own money?
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Answer rating: 100% (QA)
a To calculate the total return on the investment we need to consider the changes in the stock price and the amount borrowed Initial investment Number ... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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