Only need Part 3!

The stock price of Apple is $105. You have $10,000 to invest. The monthly interest rate charged by your broker is 0.2%, and interest expense is deducted from your account at the end of each month.

Part 1

You think the stock price will go up soon, and want to trade 120 shares. What should you do? Enter 120 for buying 120 shares (on margin if necessary), or -120 for selling or short-selling 120 shares.

Correct

You should buy 120 shares to benefit from an increase in the stock price.

Part 2

If you buy 120 shares using your $10,000 and then borrow the rest of the required funds from your broker, what is your initial margin ratio (entered as a decimal number)?

Correct

The dollar margin equals the equity in the account:

Assets = Number of shares * Stock price A = 120 * 105 = 12,600

Liabilities = Loan = Cost of shares - Own funds L = 12,600 - 10,000 = 2,600

Percentage margin=EquityValue of shares=ALNPPercentage margin=EquityValue of shares=A-LNP

= 12,6002,60012010512,600-2,600120105

= 0.794

Part 3

Two months later, the stock price is $125. What is your percentage margin (entered as a decimal number)?

????