Suppose you buy OMR2000 worth of stock on margin. The initial margin is 60% andthe maintenance margin is 30%.a. How much have you borrowed? What is your equity?b. Suppose the value of the stock rises by 15% to OMR2300. What is the return onyour investment?c. Suppose the value of the stock falls by 15% to OMR1700. What is the return on yourinvestment?d. Does buying a stock on margin increase or decrease your risk of investment? Usethe results in parts b and c to answer the question.

Given: Current worth of stock = OMR 2000 Initial margin = 60% Maintenance margin = 30%

Suppose you buy OMR2000 w the maintenance margin is 3C a. How much have you borrow b. Suppose the value of the st your investment? c. Suppose the value of the st investment? d. Does buying a stock on ma the results in parts b and c to

Suppose you buy OMR2000 w the maintenance margin is 3C a. How much have you borrow b. Suppose the value of the st your investment? c. Suppose the value of the st investment? d. Does buying a stock on ma the results in parts b and c to

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 1FPE: What makes for a good investment? Use the approximate yield formula or a financial calculator to...

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Question

Suppose you buy OMR2000 worth of stock on margin. The initial margin is 60% and
the maintenance margin is 30%.
a. How much have you borrowed? What is your equity?
b. Suppose the value of the stock rises by 15% to OMR2300. What is the return on
your investment?
c. Suppose the value of the stock falls by 15% to OMR1700. What is the return on your
investment?
d. Does buying a stock on margin increase or decrease your risk of investment? Use
the results in parts b and c to answer the question.

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