Question
Investor A opens a participation account with a commission firm and buys 300 shares of ABC company at $40/share. Borrows $6,000 from the broker with
Investor A opens a participation account with a commission firm and buys 300 shares of ABC company at $40/share. Borrows $6,000 from the broker with 8% interest to complete the purchase.
a. Calculate the participation in the account at the time investor A makes the purchase.
b. If the price falls to $30/share at the end of the year, what will be the investor's participation in the account?
c. If the participation for support is 35%, determine the type of investor's account (in the case of point b). Would the invited participation be announced to the investor, and if so, what action should be taken?
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