Question
1. On March 11, 2011 you bought 1,000 shares of Starwood Hotels & Resorts Worldwide Inc. (HOT) at $14.00 on 50% margin. The margin loan
1. On March 11, 2011 you bought 1,000 shares of Starwood Hotels & Resorts Worldwide Inc. (HOT) at $14.00 on 50% margin. The margin loan carries a 8% annual interest rate, paid every 3 months from the day of the purchase. You sold the stock on September 11, 2011 (exactly 6 months from the purchase) for $28.00. Calculate the HPR (%) and profit amount on your equity position.
2. On September 16, 2011 you sold short 100 shares of Starwood for $36.00 per share. Find your gain and losses on the following scenarios: a. Suppose the stock drops to $30 per share b. Suppose the stock rises to $42 per share c. Suppose you borrow on a 50% margin, what your return on your initial investment would be if the stock drops to $20.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started