Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose that Xtel currently is selling at $62 per share. You buy 300 shares using $12,000 of your own money, borrowing the remainder of the

image text in transcribed
Suppose that Xtel currently is selling at $62 per share. You buy 300 shares using $12,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 9%. a. What is the percentage increase in the net worth of your brokerage account if the price of Xtel immediately changes to: () $66.65; m) $62; () $57.35? What is the relationship between your percentage return and the percentage change in the price of Xtel? (Leave no cells blank - be certain to enter "o" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) L. % II. M. Percentage gain Percentage gain Percentage gain % % b. If the maintenance margin is 25%, how low can Xtel's price fall before you get a margin call? (Round your answer to 2 decimal places.) Margin call will be made at price or lower c. How would your answer to (b) change if you had financed the initial purchase with only $9,300 of your own money? (Round your answer to 2 decimal places.)

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

Step: 3

blur-text-image

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

Healthcare Finance An Introduction To Accounting And Financial Management

Authors: Louis C. Gapenski

5th Edition

1567934250, 978-1567934250

More Books

Students also viewed these Finance questions

Question

Show that e i + 1 = 0.

Answered: 1 week ago

Question

Is there statistical significance? What was the effect size?

Answered: 1 week ago