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please explain how you got all calculated numbers Suppose that the current price of eBay is $40 per share. Suppose further that the share price
please explain how you got all calculated numbers
Suppose that the current price of eBay is $40 per share. Suppose further that the share price of eBay one month from now depends 011 the state of the economy as follows: Also note that eBay will not pay any dividends over the next month. You buy 500 shares, using $10.000 of your own money and borrowing the remainder of the purchase price from your broker. The interest rate on the margin loan is 2% per month, and the maintenance margin is 30%. What is the expected return of your investment? What is the probability that you will receive a margin call from your broker one month from now? Explain with quantitative justification. Suppose you sold short 500 shares of eBay at $40, using the maximum leverage allowed, and the price went up to $52 after one month. If you close out your short position, what would be the rate of return on your investment? (ignoring transaction costs)Step by Step Solution
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