Jessie B. purchases 450 shares of Smooth Sail Inc. for $50 per share at a time when the initial margin requirement is 60%. After two months, seeing that the price of Smooth Sail has fallen to $40 per share, Jessie wishes to buy an additional 200 shares. By this time, the initial margin requirement has gone down to 50%. Will Jessie be able to do some pyramiding? What is the amount of margin he will be required to provide for his second transaction? Support answer with relevant calculations
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- Caroline owns 3000 shares of stock in Mousey Corporation. She will receive $3.30 per share dividend in one year. In two years, Mousey will pay a liquidating dividend of $45 per share. The required return on Mousey stock is 12%. Answer these questions: a) What is the current share price of Mousey stock? b) If Caroline would rather have equal dividends in each of the next two years, show how she can accomplish this by creating home dividends! c) If Caroline want only $800 total in dividends the first year. What will her homemade dividend be in two years? d) Explain what is homemade dividend? Does the timing of dividend matters or not? Why!What is Rate of Return? Adam is a retail investor and decides to purchase 10 shares of Company A at a per-unit price of $20. Adam holds onto shares of Company A for two years. In that time frame, Company A paid yearly dividends of $1 per share. After holding them for two years, Adam decides to sell all 10 shares of Company A at an ex-dividend price of $25. Adam would like to determine the rate of return during the two years he owned the shares.Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per share. She borrows $4,000 from her broker to help pay for the purchase. The interest rate on the loan is 8%.a. What is the margin in Dée’s account when she first purchases the stock?b. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 30%, will she receive a margin call?c. What is the rate of return on her investment?
- Dee Trader opens a brokerage account and purchases 200 shares of Internet Dreams at $50 per share. She borrows $3,300 from her broker to help pay for the purchase. The interest rate on the loan is 6%. Required: a What is the margin in Dee's account when she first purchases the stock? b. If the share price falls to $40 per share by the end of the year, what is the remaining margin in her account?Maggie owns 100 shares of FloorMart, Inc. The firm pays a semi-annual dividend of $0.75 per share and offers the option to reinvest the cash dividends into additional shares of company stock. If the stock is selling for $55.00 per share, how many shares of stock will Maggie receive each dividend period if she chooses the dividend reinvestment plan?Allan decides to invest in a new company which would allow him to receive $ 250,000 at the end of each year for the next 5 years. He purchases 100,000 shares at the price of $ 6.50. What is the NPV of a single share, if the interest rate is 15% per year?
- Stella plans to purchase 100 shares of a stock (ticker: HOOD) that is currentlytrading at $72 per share. She plans to get a call loan of $4,000 from her long-time broker. Herbroker will charge 2.74% interest on the loan regardless of the length of the loan. If the stockincreases by $10 over the next year, what is the return on her investment for the year?Assume she pays the interest when she returns the loan. Round your answer to two decimalplaces. Use a detailed explanation without excel. A. 13.89%B. 14.67%C. 16.67%D. 27.83%E. 31.25%Jan purchased 100 shares of Peach Computer stock for $18 per share, plus a $45 brokerage commission. Every 6 months she received a dividend from Peach of 50 cents per share. At the end of 2 years, just after receiving the fourth dividend, she sold the stock for $23 per share and paid a $58 brokerage commission from the proceeds.What annual rate of return did she receive on her investment? Solution: 1. NPW=PW of Benefits - PW of Costs=0 o Number of terms n= o PW of Benefits = (P/A,i*,n)+ (P/F,i*,n); O PW of Costs= 2. Find IRR through interpolation o Try i*=7%, NPW= o Try i*=8%, NPW= o Through interpolation, ROR= % 3. Other Calculations: o Nominal rate r= %; o Effective rate iz= %.Barbara Simmons purchased 100 shares of Home Depot stock for $187 per share, using as little of her own money as she could. Her broker has a 55% initial margin requirement and a 45% maintenance margin requirement. If the price of Home Depot stock falls to $142 per share, what does Barbara need to do?
- Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, three years ago she paid $23,000 for 500 shares of Malti Company's common stock. She received a $460 cash dividend on the stock at the end of each year for three years. At the end of three years, she sold the stock for $30,000. Kathy would like to earn a return of at least 13% on all of her investments. She is not sure whether the Malti Company stock provide a 13% return and would like some help with the necessary computations. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value that Kathy earned on her investment in Malti Company stock. 2. Did the Malti Company stock provide a 13% return? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the net present value that Kathy earned on her investment…Melissa wanted to buy Apple Inc. stock, which had a price range of $409 to $582 a month later. The current share price is $488. Her broker advises her that the price of this share could rise to $522 within the next month or so, so she should purchase a one-month Call of Apple. To be prudent in purchasing the call, the share price should be greater than or equal to $522, which her broker could not guarantee. Though she understands the market's uncertainty, she wants to know the probability of reaching the share price of $582 so that she can justify purchasing a one-month Call of Apple at the execution price of $522. Take the continuous compounded risk-free interest to be 3.60% p.a. O 0.3789 0.6211 0.5349 0.4651Kathy Myers frequently purchases stocks and bonds, but she is uncertain how to determine the rate of return that she is earning. For example, three years ago she paid $25,000 for 1,200 shares of Malti Company’s common stock. She received a $1,032 cash dividend on the stock at the end of each year for three years. At the end of three years, she sold the stock for $24,000. Kathy would like to earn a return of at least 13% on all of her investments. She is not sure whether the Malti Company stock provided a 13% return and would like some help with the necessary computations. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the net present value that Kathy earned on her investment in Malti Company stock. 2. Did the Malti Company stock provide a 13% return?