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BUS 5446 (DUTTA) CHAPTER 3 HOMEWORK You have a brokerage account with the following terms: You have a margin trading account with 50% initial margin and 35% maintenance margin. The interest rate on...

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BUS 5446 (DUTTA)            CHAPTER 3 HOMEWORK
You have a
okerage account with the following terms:
You have a margin trading account with 50% initial margin and 35% maintenance margin. The interest rate on your loans is 8% per year.
1. You deposit $15,000 of your own money in the account. You will use all of it to buy on margin a stock trading at $50 per share.
a) Calculate the price at which you will receive a margin call (5 pts)
) Calculate your ROI – if after 3 months the share pays a dividend of $0.35 per share and is trading at $56.50 per share. (5 pts)
2. You deposit $15,000 of your own money in the account. You will use all of it to short sell on margin a stock trading at $30 per share.
a) Calculate your ROI – if after 3 months the share pays a dividend of $0.75 per share and is trading at $35 per share. (5 pts)
) Calculate the price at which you will receive a margin call (5 pts)
Answered Same Day Jan 31, 2022

Solution

Prateek answered on Feb 01 2022
108 Votes
1)
(i)
(ii) Number of Shares Purchased,
Amount Taken on Loan,
ROI,
Thus, ROI is 25.40%.
2)
a. No. of Shares Purchased,
ROI,
Thus, the ROI is -14.16%.
. Margin Call at,
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