Question
On the same day, Sam purchased 100 shares of T-Rex stock for $62 a share in his margin account. His initial margin requirement on this
On the same day, Sam purchased 100 shares of T-Rex stock for $62 a share in his margin account. His initial margin requirement on this stock is 60 percent while the maintenance margin is 40 percent. Sam sold his shares after eight months at a price of $58 a share. The stock pays no dividends.
a. Create Sams initial balance sheet positions for this trade.
b. Six months later and the market price is $60 per share. Show Sams balance sheet position at this time.
c. Sam sells his shares after eight months at $58 per share. The call money rate is 4.8 percent and he pays 1.85 percent above that rate.
i.) What is the HPR for Sam?
ii.) What is the EAR for Sam?
iii. Compare the performance? Who did better and why?
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