Question
Suppose that ZX Inc. is currently selling at $50 per share. You buy 200 shares, using $5,000 of your own money and borrowing the remainder
Suppose that ZX Inc. is currently selling at $50 per share. You buy 200 shares, using $5,000 of your own money and borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 5%. 1. What is the profit or loss $ in the net worth of your brokerage account if the price of ZX Inc. changes to $46?
2. What is the profit or loss $ in the net worth of your brokerage account if the price of ZX Inc. changes to $50?
3. What is the profit or loss $ in the net worth of your brokerage account if the price of ZX Inc. changes to $54?
4. What is the rate of return on your margined position (assuming again that you invest $5,000 of your own money) if ZX Inc. is selling after one year at $46 (use whole number percentage with two decimals rounded up/down - i.e. 0.3245 input 32.45)?
5. What is the rate of return on your margined position (assuming again that you invest $5,000 of your own money) if ZX Inc. is selling after one year at $50 (use whole number percentage with two decimals rounded up/down - i.e. 0.3245 input 32.45)?
6. What is the rate of return on your margined position (assuming again that you invest $5,000 of your own money) if ZX Inc. is selling after one year at $54 (use whole number percentage with two decimals rounded up/down - i.e. 0.3245 input 32.45)?
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