Bajan Works has a margin account and deposits $30,000. Assume the prevailing margin requirement is 80 percent,

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Bajan Works has a margin account and deposits $30,000. Assume the prevailing margin requirement is 80 percent, commissions are ignored, and the Regional Wine Corporation is selling at $20 per share.

b. How many shares can Bajan Works purchase using the maximum allowable margin?

c. What is Bajan Works' profit (loss) if the price of Regional's stock rises to $30?

KDC Corp is trading at $45/share. If you believe the stock is overvalued.

d. Why type of trade could be implemented to benefit from a decline in the stock and why?

e. After, implementing the above strategy, what would be the profit or loss if KDC fell as expected and you purchased to cover at $30/share?

Posted Date: May 16, 2024 04:19 PM

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Bajan Works has a margin account and deposits $30,000. Assume the prevailing margin requirement is 80 percent,

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