Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that XTel currently is selling at $ 3 0 per share. You buy 6 0 0 shares using $ 1 3 , 5 0

Suppose that XTel currently is selling at $30 per share. You buy 600 shares using $13,500 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 6%. What is the rate of return on your margined position (assuming again that you invest $13,500 of your own money) if XTel is selling after one year at (i) $33; (ii) $30; (iii) $27? Continue to assume that a year has passed. How low can XTels price fall before you get a margin call? Note: Assume maintenance margin of 25%

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

Personal Finance

Authors: Jeff Madura, Hardeep Singh Gill

4th Canadian edition

134724712, 134724713, 9780134779782 , 978-0134724713

Students also viewed these Finance questions

Question

is BI considered an information system?

Answered: 1 week ago

Question

Explain the process of biochemistry

Answered: 1 week ago