Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

you are bullish in IBM. The current market price is $100 per share, and you have $5000 of your own to invest. you borrow an

you are bullish in IBM. The current market price is $100 per share, and you have $5000 of your own to invest. you borrow an additional $5000, from your broker at an interest rate of 5% per year and invest $10000 in the stock
a) what will be your rate of return of the price IBM stock goes up by 10%? during the next year (ignore the expected dividend)?
b) how far does the price of IBM stock have to fall for you to get a margin call if the maintenance margin is 40% (assume the price fall happens immediately)?

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

The Bank Credit Analysis Handbook

Authors: Jonathan Golin, Philippe Delhaise

2nd Edition

0470821574, 978-0470821572

More Books

Students also viewed these Finance questions