Question
As an investor in the financial market, you have two situations that you can make a profit out of. Currently, the stock price is $30
As an investor in the financial market, you have two situations that you can make a profit out of. Currently, the stock price is $30 per share. Identify the best strategy to follow for each case. (Assume 1000 shares for each case) First: When you expect that the price of BETA will decrease in 30 days to $25. The brokers initial margin requirement is 60% of the value of the position. - What will be your strategy and your position? - How much will you lose or gain if you closed your position after 30 days? - Do you receive a call if the price will be $25 per share? - What should be the price of the stock for you to receive a margin call? the maintenance margin is 25%. Second: When you expect that the price of BETA will increase in 30 days to $40. The brokers initial margin requirement is 60% of the value of the position. - What will be your strategy and your position? - How much will you lose or gain if you closed your position after 30 days? - Do you receive a call if the price will be $50 per share? - What should be the price of the stock for you to receive a margin call? the maintenance margin is 25%. HINT: draw the balance sheet for both cases before and after you take a position.
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