ish on Gator Inc., and short sell 50 shares at $120/share. Your broker requires that you post margin equal to 50% of the initial short sell proceeds, a the borrowed stock. While your short position is open, Gator pays a dividend of $2/share. You cover the short one year after entering the positio to $80/share. What is your rate of return? (Note: enter the answer in percentage points rounded to 2 decimal places; e.g., a return of -12.34% shot

ish on Gator Inc., and short sell 50 shares at $120/share. Your broker requires that you post margin equal to 50% of the initial short sell proceeds, a the borrowed stock. While your short position is open, Gator pays a dividend of $2/share. You cover the short one year after entering the positio to $80/share. What is your rate of return? (Note: enter the answer in percentage points rounded to 2 decimal places; e.g., a return of -12.34% shot

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Suppose that Brue currently is selling at $50 per share. You buy 900 shares using $36,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 7%. What is the rate of return on your margined position if Brue is selling after ONE year at (a)$56; (b)$50; and (c)$44?
A speculator sells a stock short for $71 a share. The company pays a $2.50 annual cash dividend.After a year has passed, the seller covers the short position at $63. If the margin requirement is55 percent, what is the percentage return earned on the investment? Redo the calculations, assuming the price of the stock is $78 when the investor closes theposition. Based on your calculations to both scenarios, what generalization can be inferred?
An investor sells a stock short for $97 a share. The company pays a $4.70 annual cash dividend. After a year has passed, the seller covers the short position at $85. If the margin requirement is 57 percent, what is the percentage return earned on the investment?Redo the calculations, assuming the price of the stock is $103 when the investor closes the position.Based on your calculations to both scenarios, what generalization can be inferred?
You sell short 400 shares of MIZ which are currently selling at $ 15 per share . You post the 30 % margin required on the short sale . If you earn no interest on the funds in your margin account what will be your rate of return after one year if MIZ is selling at $ 12
You are offered a chance to purchase shares in a new company which sells franchises for MamaC Pizza. Your stock broker estimates that in one year the shares will be worth 277 and will also provide a $2 annual dividend. The prevailing interest rate is 8 %. How much should you be willing to invest to to pay for one share of stock?
You've just opened a margin account with $27,755 at your local brokerage firm. You instruct your broker to purchase 700 shares of Landon Golf stock, which currently sells for $61 per share. Suppose the call money rate is 5.5 percent and your broker charges you a spread of 1.25 percent over this rate. You hold the stock for three months (or 90 days) and sell at a price of $67 per share. The company paid a dividend of $0.52 per share the day before you sold your stock. a. What is your total dollar return from this investment? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Dollar return b. What is your effective annual rate of return? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Effective annual return 78.32 %
You want to take a long position on a stock. It costs $2,500 for 1,000 shares, so you deposit $1,250 in your margin account that has a 50% initial margin requirement. You sell the stock for $1000 at the end of one year. Assume there are no dividends and the interest charged for the loan is $125 for the year. Find your yield rate.
Suppose you short sell 1000 Intel shares at $20 per share and provide your broker with an initial margin deposit equal to 80% of the short sale value. The maintenance margin is 20% (of the short sale liability). The margin account plus the short sale proceeds earn interest for you at a rate of 0.1% per month (credited to your margin account). Intel will pay a $1 dividend per share in 1 month's time. Assume Intel's share price stays approximately flat for 2 months and then spikes upwards. How high can the share price spike to in 2 months' time so that you just avoid a margin call? a. $29.16 b. $29.22 c. $30.00 d. $30.06 e. None of the above
Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account. a. if you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: $22, $20, and $18? Assume that Xtel's pays no dividends. b. If the maintenance margin is 25%, how high can Xtel's price rise before you get a margin call? c. Redo parts a and b but now assume that Xtel has paid a year end dividend of $1 per share. The pruces in part a should be interpreted as ex-dividend, that is prices after the dividend has been paid.
Suppose that you opened a margin account (margin requirement = 60%) with your brokerage firm. Through this account, you invested in 100 shares of Mercer Inc. stocks at $80 per share a year ago. While you hold the stocks (1 year), the firm paid out $0.50 dividend per share every quarter. If you sell the stocks at $90 per share today, what is the percentage return for your investment? Assume that the commission rate is 1% of the purchase and sale price, and you need to pay 2% interest on the borrowed fund.
You opened a margin account with borrowing $50,000 from your broker a year ago. Your account started at the initial margin requirement of 50%. With the margin account you bought ABC stock at $50 per share. The maintenance margin is 35%. Today, the stock price falls to $45 per share. Assume interest rate is 10%. What is the margin (your equity) in your account when you first purchase the stock? Will you receive a margin call? (Please consider interest expenses and Show percentage margin after price falls) How low can the price of ABC shares fall before you receive a margin call? Please show both with and without interest expenses. What is your rate of return (Consider Interest Expenses)?
Suppose you sell short 200 shares of BP ADR currently selling at $40 per share. You give your broker $5000 to establish your margin account. You have no interest on the funds in your margin account. Assume that BP also has paid a year-end dividend of $0.5 per share, what will be your rate of return after one year if the BP price is $38. (please keep three decimal places, such as 0.031, NOT 3.1%)

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