Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are bullish on Telecom stock. The current market price is $250 per share, and you have $21,000 of your own to invest. You borrow

image text in transcribed
You are bullish on Telecom stock. The current market price is $250 per share, and you have $21,000 of your own to invest. You borrow an additional $21,000 from your broker at an interest rate of 7% per year and invest $42.000 in the stock a. What will be your rate of return if the price of Telecom stock goes down by 8% during the next year? The stock currently pays no dividends. (Negative value should be indicated by a minus sign. Round your answer to the nearest whole number.) Rate of return b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. (Round your answer to 2 decimal places.) Margin call will be made at price or lower

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

Recent Advances In Computational Finance

Authors: Nikolaos S. Thomaidis, Jr. Dash, Gordon H.

1st Edition

1626181233, 978-1626181236

More Books

Students also viewed these Finance questions

Question

Distinguish between poor and good positive and neutral messages.

Answered: 1 week ago

Question

Describe the four specific guidelines for using the direct plan.

Answered: 1 week ago