Fin Security analysis & Portfolio MNGMT

12) Suppose you are bullish (optimistic) regarding the future price increase of stock FINCORP. You can either buy the stock directly from your broker, using your own money. Or, you can buy FINCORP on margin, borrowing $10,000 from your broker. If you buy on margin, you have a total of $20,000 to inve in FINCORP. Your holding period for Fincorp is one-year. Use the following data to answer questions a b, c, and d below. 100 $10,000 $10,000 100 shares Size of Investor's portfolio in Fincorp, if investor does NOT buy on margin 200 shares Size of investor's portfolio in Fincorp, if investor purchases Fincorp, combing personal Current price of Fincorp stock Amount invested in Fincorp, if investor purchases Fincorp using ONLY personal cash Amount invested in Fincorp, if investor borrows money $10,000 from broker cash +amount borrowed from the broker 9% per year Annual interest on borrowed money charged by the broker to the investor a) Suppose over the course of your holding period, Fincorp's price RISES to $130.00. What is the expected return on your investment in Fincorp, if you finance the purchase using only your $10,000 in cash? b) Suppose over the course of your holding period, Fincorp's price rises to $130.00. What is the expected return on your investment in Fincorp, if you finance the purchase by buying Fincorp on margin? c) Suppose over the course of your holding period, Fincorp's price FALLS to $70.00 What is the expected return on your investment in Fincorp, if you finance the purchase using only your $10,000 in cash? d) Suppose over the course of your holding period, Fincorp's price FALLS to $70.00. What is the expected eturn on your investment in Fincorp, if you finance the purchase by buying Fincorp on margin