Question
a) Suppose that you buy 200 shares of XYZ at $80 per share and that you finance $6,000 of your investment with a margin loan
a) Suppose that you buy 200 shares of XYZ at $80 per share and that you finance $6,000 of your investment with a margin loan at 6% interest. What is your initial margin?
b) Suppose that you buy 200 shares of XYZ at $80 per share and that you finance $6,000 of your investment with a margin loan at 6% interest. If the price of one share of Company XYZ goes up 8% over the course of a year, what will be your overall rate of return?
c) Suppose that you buy 200 shares of XYZ at $80 per share and that you finance $6,000 of your investment with a margin loan at 6% interest. What price will XYZ have to be in one year in order for you to receive a margin call if your broker requires a maintenance margin of 25%?
(Do not round intermediate calculations. Negative values should be indicated by a minus sign. Round your answer to 1 decimal place.)
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Managerial Accounting Tools For Business Decision Making
Authors: Jerry J. Weygandt, Paul D. Kimmel, Ibrahim M. Aly, Donald E. Kieso
6th Canadian Edition
1119731828, 9781119731825
