Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The price of Walmart stock is currently $38.7 and you decide to buy 100 shares on margin. The inital margin is 60% and the broker's

The price of Walmart stock is currently $38.7 and you decide to buy 100 shares on margin. The inital margin is 60% and the broker's maintenance margin is 40%. The broker charges an effective interest rate of 8% on the margin loan.

1) How much money do you borrow if you borrow as much as possible?

2) After the 9 months, the stock price has changed to $35.64 and the stock has paid dividends of $1.79 per share. What is the new percentage margin in the account?

3) What is your effective annual return?

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

Financial Management For Nurse Managers Merging The Heart With The Dollar

Authors: J. Michael Leger

5th Edition

1284230937, 9781284230932

More Books

Students also viewed these Finance questions

Question

8. What is its net present value?

Answered: 1 week ago