Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Old Economy Traders opened an account to short-sell 2,900 shares of internet Dreams at $79 per share. The initial margin requirement was 50% (The margin

image text in transcribed
image text in transcribed
Old Economy Traders opened an account to short-sell 2,900 shares of internet Dreams at $79 per share. The initial margin requirement was 50% (The margin account pays no interest) A year later, the price of internet Dreams has risen from $79 to $90, and the stock has paid a dividend of $250 per share 6. What is the remaining margin in the account? (Round your answer to the nearest whole dollar) Remaining margin You are bullish on Telecom stock. The current market price is $160 per share, and you have $18,000 of your own to invest. You borrow an additional $18,000 from your broker at an interest rate of 5% per year and invest $36,000 in the stock, 6. What will be your rate of retum if the price of Telecom stock goes down by 6% during the next year? The stock currently pays no dividends (Negative value should be Indicated by a minus sign. Enter your answer as a percent rounded to the nearest whole number.) Rate of return b. How far does the price of Telecom stock have to fall for you to get a margin call it the maintenance margin is 30%? Assume the price fall happens immediately (Round your answer to 2 decimal places.) Margin call will be made at price | or lower

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Inside Private Equity

Authors: James M. Kocis, James C. Bachman IV, Austin M. Long III, Craig J. Nickels

1st Edition

0470421894, 978-0470421895

More Books

Students also viewed these Finance questions

Question

2. What potential barriers would you encourage Samuel to avoid?

Answered: 1 week ago