Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You decide to sell 100 shares of Mason Enterprises short when it is selling at its yearly high of 42.25. Your broker tells you that

You decide to sell 100 shares of Mason Enterprises short when it is selling at its yearly high of 42.25. Your broker tells you that your margin requirement is 60 percent and that the commission on the sale is 20 and a 6% interest rate on margin debt. While you are short, Mason Enterprises pays a 0.85 per share dividend. a. If at the end of one year you buy your Mason Enterprises shares to cover your short sale at 35 and are charged a commission of 25, what is your rate of return on the investment? b. If at the end of one year you buy your Mason Enterprises shares to cover your short sale at 80 and are charged a commission of 20, what is your rate of return on the investment? c. At what price would you receive a margin call from the broker if the maintenance margin is 30%?

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_2

Step: 3

blur-text-image_3

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

Personal Financial Planning For Executives And Entrepreneurs

Authors: Michael J. Nathanson, Jeffrey T. Craig, Jennifer A. Geoghegan, Nadine Gordon Lee, Michael A. Haber, Seth P. Hieken, Matthew C. Ilteris, D. Scott McDonald, Joseph A. Salvati, Stephen R. Stelljes

1st Edition

3030405273, 978-3030405274

More Books

Students also viewed these Finance questions

Question

5. List the forces that shape a groups decisions

Answered: 1 week ago

Question

4. Identify how culture affects appropriate leadership behavior

Answered: 1 week ago