Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are bullish on Telecom stock. The current market price is $20 per share, and you have $5,400 of your own to invest. You
You are bullish on Telecom stock. The current market price is $20 per share, and you have $5,400 of your own to invest. You borrow an additional $5,400 from your broker at an interest rate of 8% per year and invest $10,800 in the stock. Required: a. What will be your rate of return if the price of Telecom stock goes up by 15% during the next year? The stock currently pays no dividends. b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 25%? Assume the price fall happens immediately. Complete this question by entering your answers in the tabs below. Required A Required B What will be your rate of return if the price of Telecom stock goes up by 15% during the next year? The stock currently pays no dividends. Note: Negative value should be indicated by a minus sign. Enter your answer as a percent rounded to the nearest whole number. Rate of return % You are bullish on Telecom stock. The current market price is $20 per share, and you have $5,400 of your own to invest. You borrow an additional $5,400 from your broker at an interest rate of 8% per year and invest $10,800 in the stock. Required: a. What will be your rate of return if the price of Telecom stock goes up by 15% during the next year? The stock currently pays no dividends. b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 25%? Assume the price fall happens immediately. Complete this question by entering your answers in the tabs below. Required A Required B How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 25%? Assume the price fall happens immediately. Note: Round your answer to 2 decimal places. Margin call will be made at price or lower < Required A Required B
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started