Question
d . What is the rate of return on your margined position (assuming again that you invest $8,000 of your own money) if Intel is
d. | What is the rate of return on your margined position (assuming again that you invest $8,000 of your own money) if Intel is selling after 1 year at: (i) $48.76; (ii) $46; (iii) $43.24? What is the relationship between your percentage return and the percentage change in the price of Intel? Assume that Intel pays no dividends. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "%" sign in your response.) |
(i) Rate of return | % |
(ii) Rate of return | % |
(iii) Rate of return | % |
e. | Continue to assume that a year has passed. How low can Intels price fall before you get a margin call? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) |
Margin call will be made at price | $ or lower |
I NEED PART D ONLY but this the first part of the problem. There is the solution in check from a-c I posted and that is correct but they didn't answer D, You don't need more information.
Suppose that Intel currently is selling at $46 per share. You buy 250 shares using $8,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 6%. |
a. | What is the percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to: (i) $48.76; (ii) $46; (iii) $43.24? What is the relationship between your percentage return and the percentage change in the price of Intel? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "%" sign in your response.) |
(i) Percentage gain | % |
(ii) Percentage gain | % |
(iii) Percentage gain | % |
b. | If the maintenance margin is 25%, how low can Intels price fall before you get a margin call? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) |
Margin call will be made at price | $ or lower |
c. | How would your answer to (b) change if you had financed the initial purchase with only $5,750 of your own money? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) |
Margin call will be made at price | $ or lower |
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