Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose that you sell short 200 shares of Xtel, currently selling for $100 per share, and give your broker $10,000 to establish your margin account
Suppose that you sell short 200 shares of Xtel, currently selling for $100 per share, and give your broker $10,000 to establish your margin account a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (1) $110: (11) $100; (111) $95? Assume that Xtel pays no dividends. (Leave no cells blank.be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) Rate of return i. ji. Rate of return iii. Rate of return b. If the maintenance margin Is 25%, how high can Xtel's price rise before you get a margin call? (Round your answer to 2 decimal places.) Margin call will be made at price f o r higher c. Redo parts (a) and (b), but now assume that Xtel also has pald a year-end dividend of $1 per share. The prices in part (a) should be Interpreted as ex-dividend, that is, prices after the dividend has been pald. (Negative values should be Indicated by a minus sign. Round your answers to 2 decimal places.) i. Rate of return Rate of return Rate of return iii. Margin call will be made at price or higher
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