Question
True or False 5. For a stock trading at $60 per share, a stop buy order would specify a price > $60. 6. A margin
True or False
5. For a stock trading at $60 per share, a stop buy order would specify a price > $60.
6. A margin rate of 65% would mean that only 35% of a trade requires cash.
7. If the margin rate is 50%, the leverage factor would be 0.50.
8. If the stock price is $40, shares are 100, margin rate is 60% and maintenance margin is 25%, the lowest price before a margin call would be less than $22.
9. The purchaser of short sale stock receives dividends from the short seller.
10. If you pay $10 for a stock on 40% margin and it improves to $12, your return on margin > 40%.
11. The leverage factor will reduce the percentage loss to the investor if the stocks declines in price.
12. If you bought a stock at $25 that now sells for $45 and place a stop loss order at $40, your rate of return when the stock declines to $30 is less than 50%.
13. If you place a limit order to buy at $24 on a stock selling for $28, your rate of return when the stock declines to $20 and then jumps to $36 is more than 40%.
14. If you can buy 100 shares of stock with cash, you can buy 250 shares on 40% margin.
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