Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that an investor buys 300 shares on margin at $40 per share. The initial margin is 50% and the maintenance margin is 30%. After

Suppose that an investor buys 300 shares on margin at $40 per share. The initial margin is 50% and the maintenance margin is 30%. After one year, the investor sells the shares for $38 and closes the long position. During the holding period, the shares paid a dividend of $1.30 per share. Interest on the margin loan is 7% annual. Show the calculations for the numbers you enter in the T accounts. a. Show the investors beginning T account. At what price would this investor receive a margin call? (calcs here) b. Show the investors T account at the share price of $38. What is the actual margin at this price? (calcs. here) c. Calculate the investors return for the holding period.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance And Democracy Towards A Sustainable Financial System

Authors: Alessandro Vercelli

1st Edition

3030279111, 978-3030279110

More Books

Students also viewed these Finance questions

Question

What are the basic tax-filing requirements imposed on partnerships?

Answered: 1 week ago

Question

Define promotion.

Answered: 1 week ago

Question

Write a note on transfer policy.

Answered: 1 week ago

Question

Discuss about training and development in India?

Answered: 1 week ago

Question

Explain the various techniques of training and development.

Answered: 1 week ago