A stock is trading at $34.5. You can purchase the stock on margin with initial margin @50%

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A stock is trading at $34.5. You can purchase the stock on margin with initial margin @50% or you can enter into a synthetic stock structure with a pair of 6-month at-the-money call and put with the following quotes:

Call @$34

Bid=1.50

Ask=1.85

Put @34

Bid=1.25

Ask=1,45

lfthe stock trades at $36 in 6 months, what will be the gain/loss % (ROIC) differential between a margin trade and a synthetic stock trade?

Synthetic ahead 150%
Synthetic ahead 250%
Synthetic ahead 141.3%
Synthetic ahead 241.3%

Related Book For answer-question

Financial Reporting And Analysis

ISBN: 9781260247848

8th Edition

Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer

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Posted Date: Oct 08, 2023 02:49 AM

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A stock is trading at $34.5. You can purchase the stock on margin with initial margin @50%

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Margin trade Initial investment 345 50 1725 Return on investment ROI if stock trades at 36 36 345 15 ... View the full answer

Financial Reporting And Analysis

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