Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The current market price of a stock is $40 per share, and you have $8,000 of your own to invest. You borrow an additional $8,000

image text in transcribed
The current market price of a stock is $40 per share, and you have $8,000 of your own to invest. You borrow an additional $8,000 from your broker at an interest rate of 4.0% per year and invest $16,000 in the stock. a.) What will be your rate of retur if the price of the stock goes up by 6.0% during the next year? b.) How far does the price of the stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. 15. You are bearish on a technology stock and decide to sell short 100 shares at the current market price of $36.00 per share. I a.) How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position b.) How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position

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

Financial Markets And Institutions

Authors: Frederic S. Mishkin, Stanley Eakins

6th International Edition

0321552113, 9780321552112

More Books

Students also viewed these Finance questions

Question

Did you trace the accomplishments, issues, and milestones?

Answered: 1 week ago