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Helene -a bullish investor just opened a brokerage account at STAR investment company. Her decision was to trade on Sephora Co, stocks. She decided to
Helene -a bullish investor just opened a brokerage account at STAR investment company. Her decision was to trade on Sephora Co, stocks. She decided to buy 300 shares at the current stock price of $120/share. The broker advised her to borrow at 6% interest rate and additionally required the following margin requirements: Margin Requirement rates Initial 80% Maintenance 30% 3. Considering that the Sephora's stock price has dropped by 4% reaching $115.2. will Helene's broker send her a margin call? A) No, since the maintenance margin is less than the margin rate B) No, since the maintenance margin is more than the margin rate C) Yes, since the maintenance margin is less than the margin rate D) Yes, since the maintenance margin is more than the margin rate E) None of the above 4. What would be the rate of return on her investment A) Loss of 6.5% B) Gain of 6.5% C) Neither gain nor loss D) None of the above 5. Assume that after 1 year, Helene gets a margin call, what is Sephora's stock price in this case? A) Above $36.3 B) Below $36.3 C) Below $34.2 D) Above $34.2 E) None of the above
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