Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose Teresa wants to purchase 700 shares of Hydroflex stock at $30 per share through Nevada Brokerage. The value of the shares is If Teresa
Suppose Teresa wants to purchase 700 shares of Hydroflex stock at $30 per share through Nevada Brokerage. The value of the shares is If Teresa does not have enough funding to purchase the shares herself, and Nevada Brokerage requires an initial margin of at least 50 percent, Teresa's initial equity investment would need to be at least in order for Nevada Brokerage to lend her the funds. If Teresa invests this amount, then Nevada Brokerage would cover the remaining If the price of Hydroflex's decreases to $20 per share, then the total value of Teresa's shares is now . As a result, Teresa still owes the brokerage firm , and as a result, her equity position is now , which represents of the market value of the stock. If Nevada Brokerage requires a maintenance margin of 35 percent, then Teresa receive a margin call from Nevada Brokerage. If Nevada Brokerage requires a 10 percent annual interest payment on the loaned funds, the shares paid out an annual divided of $2 per share, and Teresa sold the shares at the end of the year when the price dropped to $20 per share, then what would her return on stocks purchased on margin be? -72.83 percent -63.33 percent 57,00 percent -50.66 percent If Teresa was able to fund the entirety of the stock purchase herself and sold the shares at the end of the year when the price dropped to $20 per share, then what would her return on stocks purchased be? -32.54 percent -26.67 percent -25.34 percent -23.20 percent True or False: Based on your calculations, it can be concluded that purchasing stock on margin results in fewer losses if the stock price decreases. True False
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started