Suppose you want to buy 400 shares of Starbucks (SBUX) at $75 per share. Initial margin requirement
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Question:
Suppose you want to buy 400 shares of Starbucks (SBUX) at $75 per share. Initial margin requirement is 65%. Call money rate plus the spread is 7%. You supplied cash just to meet the initial margin requirement and invested the rest on margin.
A.) What is your HPR and EAR, respectively if the price is $60 6 months later?
B.) What would the HPR and EAR have been if you had not invested on margin (i.e. using cash account)?
Related Book For
Operations Management in the Supply Chain Decisions and Cases
ISBN: 978-0073525242
6th edition
Authors: Roger Schroeder, M. Johnny Rungtusanatham, Susan Goldstein
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