Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Company X stock is currently selling at $10 per share but they are positioning very well at the market and are continuously increasing their sales

image text in transcribed

Company X stock is currently selling at $10 per share but they are positioning very well at the market and are continuously increasing their sales and profits. You have $5000 and want to invest in these shares. But your broker advises you to buy on margin, as the stock price is about to increase. So, you borrow another $5000 from your broker at the interest rate of 5% and invest in 1000 shares of Company X stock. A) Calculate the initial margin and set the initial balance sheet. B) If the maintenance margin is 30%, how far can the stock price fall before the investor gets a margin call? C) What will be the rate of return if the price of stock fell to $7

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_2

Step: 3

blur-text-image_3

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

This Dad Sells Real Estate Got Referrals

Authors: Be Mi Real Estate Store

1st Edition

B0BW267J4G

More Books

Students also viewed these Finance questions

Question

We need a set of shelves 10 feet, eight inches long.

Answered: 1 week ago

Question

Remove the given word in all the places in a string?

Answered: 1 week ago