Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Chapter 11 Financial Planning Exercise 4 Calculating profits on margined and unmargined investments Claire Gerber wants to buy 500 shares of Google, which is selling

Chapter 11 Financial Planning Exercise 4 Calculating profits on margined and unmargined investments

Claire Gerber wants to buy 500 shares of Google, which is selling in the market for $546.14 a share. Rather than liquidate all her savings, she decides to borrow through her broker at 5 percent a year. Assume that the margin requirement on common stock is 50 percent. If the stock rises to $625 a share over the next year, calculate the dollar profit and percentage return that Claire would earn if she makes the investment with 50 percent margin. Contrast these figures to what she'd make if she uses no margin.

Calculate the dollar net profit. Round the answers to the nearest dollar.

WITHOUT MARGIN $ __________ WITH 50% MARGIN $__________

Calculate the return on investment. Round the answers to two decimal places.

WITHOUT MARGIN $ __________ WITH 50% MARGIN $__________

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Victorian Literature And Finance

Authors: Francis O'Gorman

1st Edition

0199281920, 978-0199281923

More Books

Students also viewed these Finance questions

Question

How can a firm successfully undertake price discrimination

Answered: 1 week ago

Question

9. Explain the relationship between identity and communication.

Answered: 1 week ago

Question

a. How do you think these stereotypes developed?

Answered: 1 week ago

Question

a. How many different groups were represented?

Answered: 1 week ago