Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Mr. Borak who is very optimistic about the future earnings of XBANK bought 1000 shares of XBANK at the price of 5.2$ per share. He
- Mr. Borak who is very optimistic about the future earnings of XBANK bought 1000 shares of XBANK at the price of 5.2$ per share. He then decided to borrow a loan from his brokerage house in order to buy additional shares of XBANK
- What is the maximum amount of the loan he can get?
- Supposing that he gets that maximum amount of loan; what will be his initial margin ratio?
- Suppose the price of XBANK is up to 7.4$ /share after four months. What will be Mr. Boras net profit (in all stocks he bought) given that the annual interest rate on such loans is 15%?
- Suppose that the price of XBANK is down to 2.9$ after one month. What will be the margin ratio on that day? If the maintenance ratio is 0.35; will he receive a margin call? If so; how much addtional money he must deposit?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Accounting
Authors: Belverd E Needles, Marian Powers
10th Edition
0547193289, 9780547193281
