Question
An investor of $10,000 to invest Twitter Inc. currently traded at $100 with 50% initial margin. Suppose Twitter does not pay dividend. Maintenance margin
An investor of $10,000 to invest Twitter Inc. currently traded at $100 with 50% initial margin. Suppose Twitter does not pay dividend. Maintenance margin percentage required by the broker is 35%. Ignore the interest on the margin. What is the total market value of Twitter stock the investor purchased? b) At what price of Twitter stock will the investor receive a margin call from the broker? c) What is the margin percentage if the Twitter stock drops by 30%? d) What is the rate of return on the investor's investment if the Twitter stock drops by 30%?
Step by Step Solution
3.62 Rating (167 Votes )
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 StartedRecommended Textbook for
Investments
Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
9th Edition
73530700, 978-0073530703
Students also viewed these Finance questions
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
View Answer in SolutionInn App