You purchased 200 shares of ABC company at $50 each with an initial margin of 50%. The

Fantastic news! We've Found the answer you've been seeking!

Question:

You purchased 200 shares of ABC company at $50 each with an initial margin of 50%. The broker will charge 10% interest on the money you borrowed.

(a) Now suppose the price of ABC company rises by 10% next year. What will be the rate of return on your investment? (Assume stock does not pay dividend)

(b) Suppose the maintenance margin is 25%. How far the price should fall to get a margin call? (Assume price falls immediately)

Related Book For answer-question

Auditing A Practical Approach

ISBN: 9780730382645

4th Edition

Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton

See More Books

Posted Date: Jan 30, 2024 12:04 AM

See More Questions

You buy 200 shares of ABC at 70$ a share. You borrow from your broker and your margin is 60%. 1) How much of your own money have you used? 2) After bad earning news, the price of ABC shares falls to...
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
7.1. Using risk-neutral valuation, derive a formula for a derivative that pays cash flows over the next two periods. Assume the risk-free rate is 4 percent per period. The underlying asset, which...
Ski Aus is a company that makes fashionable, high performance and expensive ski clothing (ski wear). Ski Aus has traditionally segmented the market by clothing type (e.g., ski pants, ski jackets,...
To what extent do you think dressing expensively and fashionably really contributes to the charisma of a leader within an organization?
Lakeridge Stores is planning its staffing for the upcoming holiday season. From past history, the store determines that it needs one additional sales clerk for each $15,000 in daily sales. The...
In September 2013, Ugo Mattera entered into a written construction contract with Baja Properties, LLC. Stephen Chad Golden, the sole owner of Baja Properties, signed the contract and addendums on...
Golden Companys total overhead cost at various levels of activity are presented below: Assume that the overhead cost above consists of utilities, supervisory salaries, and maintenance. The breakdown...
Discuss similarities and differences of A. MongoDB, B. Amazon (AWS) database management system to relational database management systems. Indicate the benefits or disadvantages you associate with the...
In Problem, use the graph of the function f shown to estimate the indicated limits and function values. (A) (B) (C) (D) f(-2) (E) is it possible to redefine f(-2) so that Explain. Figure for 17-2...
In relation to the ruling system in Australia which of the following statements is most correct ? 1. Public rulings issued before 1 July 1992 are legally binding on the Commissioner of Taxation. 2....
What is trade credit?
Explain digital marketing.
Explain the importance of integrating digital and traditional communications channels through the customer lifecycle.
What are the four credit policy variables?
How can digital marketing be used to develop new markets and penetrate existing markets? What types of new products can be delivered by the internet?
Beauty Soft Inc. produces an oil that is widely used to soften and moisturize dry skin. The oil is produced in three processes: Refining, Blending, and Mixing. Raw oil materials are introduced at the...
Suppose you won a financial literacy competition and are given FJS10000 to invest, with the condition that investment can be done either in, i) Invest in Unit trust of Fiji or Invest in Fijian...
Why would an auditor consider the state of the economy when gaining detailed knowledge of an entity?
The following is a copy of the auditors working paper for auditing cash at bank balances for the client New Millennium Eco products. It shows the details of the bank confirmation requests. Required...
Explain how an auditors preliminary assessment of materiality affects audit planning.
Using the tools provided to you in this chapter, conduct a comprehensive review one of the websites listed below. Is it a reliable resource without underlying motivations? MinimumWage.com ...
Research and find at least three reports of fabricated or misleading news causing damage to a company or organization. Consider how the news was created and disseminated. What could have been done,...
What are the strategies for effective secondary research searches?

You purchased 200 shares of ABC company at $50 each with an initial margin of 50%. The

Question:

Expert Answer:

a Rate of Return on Investment with 10 Price Increase Initial investment 200 shares 50share 50 m... View the full answer

Auditing A Practical Approach

Students also viewed these finance questions