Suppose Josh gets a $7500 gift from his family on graduation & wants to buy securities with this. He talks to his broker who informs him that the initial (minimum) margin requirement to be 25%. He, however, decides to use his entire gift to buy only 150 shares in HSBC at an initial price of $100 each. (a) What is the initial percentage Margin on Josh's account? (b) If R is Josh's portfolio return, and R= A.RHSBC, where RHSBC is HSBC's return, what is A? (c) If HSBC's beta is 0.975, what is the beta of Josh's portfolio?
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- 1. Suppose Einar Aas (who is that?) buys 200 shares of Nordic Power Corp. at $50 cach. The clearinghouse NASDUCK sets a margin requirement of 25% and charges an interest rate of r = 2% on the loan for purchasing the shares. K (a) How much cash does Einar need to invest? (b) Calculate the margin call of NASDUCK if the price falls to $46. (c) What is the return for Einar on the transaction after the price decline? (d) How is the return on equity influenced by a change in the interest rate r? Does your answer depend on the size of the margin requirement? [Hint: For this sensitivity analysis use a derivative with respect to r and, then, m.]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: (i) $22; (ii) $20; (iii) $18? Assume that Xtel 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 also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.A6) Jean has a margin account with a balance of $50,000. If the initial margin requirement is 50 percent, and Nicora is currently selling at $50 per share: · How many shares of Nicora Co can Jean buy? · If the maintenance margin is 25 percent, to what price can Nicora Co stock price fall before Jean receives a margin call? . what would be return if Jean sells shares at $60 after and broker charges 50 dollars per each transaction (ignore interest on debt and dividends)
- Jason Momoa put up $18,000 to take a long position in XYZ stock with a price of $30. a) If the initial margin rate on the position is 60%, how many shares can you purchase? b) What dollar amount are you borrowing from the brokerage firm? Include working2. Suppose you buy shares of a stock worth OMR20000 and the initial margin is 50% and the maintenance margin is 30%. A. How much money must you pay the broker for the shares? How much have you borrowed from the broker? B. Suppose the price of the stock falls so that the shares are only worth OMR10000. What would be your nev account equity? C. How much money you need to give the broker to meet the maintenance margin?Suppose Tyler initially pays $76,000 toward the purchase of $108,000 worth of stock, borrowing the remaining balance from one of notorious brokers, Diego. In this case, Tyler’s initial percentage margin is closest to A. 70.37%. B. 60.50%. C. 39.50%. D. 29.63%. Clear my choice
- Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $58 per share. She borrows $2,200 from her broker to help pay for the purchase. The interest rate on the loan is 12%. Required:a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to $48 per share by the end of the year, what is the remaining margin in her account? c. If the maintenance margin requirement is 30%, will she receive a margin call?multiple choice Yes No d. What is the rate of return on her investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $58 per share. She borrows $2,200 from her broker to help pay for the purchase. The interest rate on the loan is 12%. Required:a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to $48 per share by the end of the year, what is the remaining margin in her account? c. If the maintenance margin requirement is 30%, will she receive a margin call?multiple choice Yes No Correct d. What is the rate of return on her investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $58 per share. She borrows $2,200 from her broker to help pay for the purchase. The interest rate on the loan is 12%. Required:a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to…Suppose that you sell short 1000 shares of Xtel, currently selling for $50 per share, and give your broker $40,000 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: (i) $55; (ii) $50; (iii) $46? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? (Round your answer to 2 decimal places.) c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $2 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)
- .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: (i) $22; (ii) $20; (iii) $18? Assume that Xtel 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 also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.13.4. (a) Suppose you decide to short sell some GameStop shares. Their cur- rent price is $5, and you have $5000 available to you. Your broker tells you that you have an initial margin requirement of 50%, with maintenance margin 35%. i. How many shares can you shortsell? How much cash will there be in the margin account? ii. Suppose GameStop rises in value to $6 per share. What percent- age margin do you have now? iii. How high will GameStop have to rise before you will get a margin call? (b) Suppose you have purchased some GameStop shares on margin at $5 per share. You ask your broker to put in a limit sell order at $7, and a stop loss order at $4.50. i. What will happen if the stock price falls to $4.50? ii. What will happen if the stock price rises to $7? iii. Now suppose you had instead short-sold your GameStop shares (as in the first part of the question). What instructions might you give to your broker to minimise your losses and lock in your gains? (c) It is more difficult to…Suppose that XTel currently is selling at $50 per share. You buy 800 shares using $30,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 7%. Required:a. What is the percentage increase in the net worth of your brokerage account if the price of XTel immediately changes to (i) $56; (ii) $50; (ii) $44? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) b. If the maintenance margin is 25%, how low can XTel’s price fall before you get a margin call? (Round your answer to 2 decimal places.) c. How would your answer to requirement b would change if you had financed the initial purchase with only $20,000 of your own money? (Round your answer to 2 decimal places.)