Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are interested in buying Lyft shares. You have $5,000 in cash and your broker offers you a margin loan for 4% interest rate and

image text in transcribed

You are interested in buying Lyft shares. You have $5,000 in cash and your broker offers you a margin loan for 4% interest rate and initial margin of 40%. You took the loan and purchased Lyft shares for Po. When the price changes to P1, what is your new equity, new margin, and return on investment? Instructions for this question: Po is the closing price of Lyft on March 8, 2021. P1 is the closing price of Lyft on March 9, 2021. In your calculations, do not ignore the cost of financing O A. Equity is $4,945, margin is 39.796, and the return on investment is -1.196. O B. Equity is $4,645, margin is 37.3%, and the return on investment is -7.1%. O C. Equity is $4,617, margin is 38.1%, and the return on investment is -7.7%. O D. Equity is $4,317, margin is 35.6%, and the return on investment is -13.7%

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

Business Valuations Fundamentals Techniques And Theory

Authors: NACVA

1st Edition

1394204736, 978-1394204731

More Books

Students also viewed these Finance questions