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Question 1 Not yet saved Marked out of 3.00 Flag question Question 2 Not yet saved Marked out of 3.00 Flag question Which statement about margin calls is NOT correct? When a broker makes a margin call and no extra cash is deposited by the borrower, the borrower's: Select one: O a. Current LVR must have been higher than the maximum allowed LVR. O b. Assets are sold and used to repay the debt. O c. Equity or net wealth will be higher after the assets are sold. O d. The margin loan liability will be paid down so that the current LVR is less than or equal to the maximum LVR. Your hedge fund uses margin loans to amplify its returns on equity. The margin loan's maximum loan-to-valuation ratio (LVR) is 50% and your current LVR is 40%. If your LVR ever exceeds the 50% maximum, your margin loan lender will call you (margin call) and insist that you deposit cash or other collateral, or sell some assets to pay down your debt until your LVR is less than or equal to the maximum. What's the smallest capital return (proportional price change) on your assets that will trigger a margin call? All returns are given as effective rates. Select one: O a. -5% O b. -20% O c. -40% O d. -50% O e. -80% Next page Quiz navigation PART A (40 Marks) 2 3 4 5 6 7 9 17 10 11 12 18 19 20 13 14 23 PART B (60 Marks) 21 22 222 Save and review Time left 2:39:32 15 SP 8 16 中心 Y Question 1 Not yet saved Marked out of 3.00 Flag question Question 2 Not yet saved Marked out of 3.00 Flag question Which statement about margin calls is NOT correct? When a broker makes a margin call and no extra cash is deposited by the borrower, the borrower's: Select one: O a. Current LVR must have been higher than the maximum allowed LVR. O b. Assets are sold and used to repay the debt. O c. Equity or net wealth will be higher after the assets are sold. O d. The margin loan liability will be paid down so that the current LVR is less than or equal to the maximum LVR. Your hedge fund uses margin loans to amplify its returns on equity. The margin loan's maximum loan-to-valuation ratio (LVR) is 50% and your current LVR is 40%. If your LVR ever exceeds the 50% maximum, your margin loan lender will call you (margin call) and insist that you deposit cash or other collateral, or sell some assets to pay down your debt until your LVR is less than or equal to the maximum. What's the smallest capital return (proportional price change) on your assets that will trigger a margin call? All returns are given as effective rates. Select one: O a. -5% O b. -20% O c. -40% O d. -50% O e. -80% Next page Quiz navigation PART A (40 Marks) 2 3 4 5 6 7 9 17 10 11 12 18 19 20 13 14 23 PART B (60 Marks) 21 22 222 Save and review Time left 2:39:32 15 SP 8 16 中心 Y

Answer rating: 100% (QA)

In Question 1 the statement that is NOT correct ... View the full answer