Problem 4-06

Barbara buys 110 shares of DEM at $27.00 a share and 250 shares of GOP at $36.00 a share. She buys on margin and the broker charges interest of 8 percent on the loan.

1. If the margin requirement is 55 percent, what is the maximum amount she can borrow? Round your answer to the nearest cent.

   $

2. If she buys the stocks using the borrowed money and holds the securities for a year, how much interest must she pay? Round your answer to the nearest cent.

   $

3. If after a year she sells DEM for $15.00 a share and GOP for $27.00 a share, how much did she lose on her investment? Use a minus sign to enter the amount as a negative value. Round your answer to the nearest cent.

   $

4. What is the percentage loss on the funds she invested if the interest payment is included in the calculation? Use a minus sign to enter the amount as a negative value. Round your answer to two decimal places.

   %