Question
The price of Walmart stock is currently $47.03 and you decide to buy 170 shares on margin. The inital margin is 60% and the broker's
The price of Walmart stock is currently $47.03 and you decide to buy 170 shares on margin. The inital margin is 60% and the broker's maintenance margin is 30%. The broker charges an effective interest rate of 3% on the margin loan.
1. How much money do you have to contribute to the account if you borrow as much as possible?
2.If the price rises to $55.14 after 3 months, what is the new percentage margin in the account?
3. What is your effective annual return?
4. What is the minimum value the stock price can take before you are issued a margin call?
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