Question
. You buy 400 shares of stock at $52 per share on a 60% margin requirement. In 3 months, the stock goes to $68. A.
. You buy 400 shares of stock at $52 per share on a 60% margin requirement. In 3 months, the stock goes to $68.
A. Calculate your margin % when the stock goes to 68.
B. Calculate the excess and buying power, if any, when the stock hits 68.
C. When would a margin call occur, assuming the maintenance margin is 30%.
D. If you sell your stock when it is at 68, what would be your holding-period return (assume margin loans are charged a 9% interest rate)?
E. What would have been your holding-period return if you had done the same trade on a cash basis?
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