Claire Gerber wants to buy 100 shares of Google, which is selling in the market for $548.66 a share. Rather than liquidate all her savings, she decides to borrow through her broker at 5 percent a year. Assume that the margin requirement on common stock is 50%. If the stock rises to $625 a share over the next year, calculate the dollar profit and percentage return that Claire would earn if she makes the investment with 50% margin. Contrast these figures to what she'd make if she uses no margin. Calculate the dollar net profit. Round the answers to the nearest dollar. Without Margin With 50% Margin Calculate the return on investment. Round the answers to two decimal places. Without Margin With 50% Margin
Claire Gerber wants to buy 100 shares of Google, which is selling in the market for $548.66 a share. Rather than liquidate all her savings, she decides to borrow through her broker at 5 percent a year. Assume that the margin requirement on common stock is 50%. If the stock rises to $625 a share over the next year, calculate the dollar profit and percentage return that Claire would earn if she makes the investment with 50% margin. Contrast these figures to what she'd make if she uses no margin. Calculate the dollar net profit. Round the answers to the nearest dollar. Without Margin With 50% Margin Calculate the return on investment. Round the answers to two decimal places. Without Margin With 50% Margin
Chapter14: Property Transact Ions: Capital Gains And Losses, § 1231, And Recapture Provisions
Section: Chapter Questions
Problem 43P
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Claire Gerber wants to buy 100 shares of Google, which is selling in the market for $548.66 a share. Rather than liquidate all her savings, she decides to borrow through her broker at 5 percent a year. Assume that the margin requirement on common stock is 50%. If the stock rises to $625 a share over the next year, calculate the dollar profit and percentage return that Claire would earn if she makes the investment with 50% margin. Contrast these figures to what she'd make if she uses no margin.
Calculate the dollar net profit. Round the answers to the nearest dollar.
Without Margin | With 50% Margin |
Calculate the
Without Margin | With 50% Margin |
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