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You have $30,000 in a margin account, 60% initial margin required. Suppose you buy 1,000 shares of IBM, for $50/share. Assume no dividends, and that your borrowing rate is 6.4%. What is your percentage
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- Suppose that you sell short 500 shares of Intel, currently selling for $40 per share. Your initial percentage margin is 60%. Assume you earn no interest on the funds in your margin account and Intel has paid no dividends. a. What will be your rate of return after one year if Intel stock is selling at $40? b. If the maintenance margin is 30%, how high can Intel's price rise before you get a margin call?Suppose you purchase 500 shares of Blue Acre, which currently trading at $60 per share. Suppose that after one year the price of Blue Acre rose to $75. You purchased this stock on margin and the margin account had 70% initial margin. The margin loan has an APR of 8% and is compounded monthly. What is your return?You are selling short 1000 shares of company A, which is currently selling its shares for $100/share. This company is paying a dividend of 0.8$ per share. The initial margin is 50%. Set the initial balance sheet. • Set the balance sheet in case the price goes up 20% If the maintenance margin is 40%, how much can the price increase before the investor would get a margin call? What will be the rate of return if the price of the stock fell to 90$? What will be the rate of return in case the price increases to 120$?
- Suppose you sell short 300 shares of stock initially selling for $40 a share. Your initial margin requirement is 50% of the value of the stock sold. The stock pays $2 dividend per share at year-end. How much do you need to contribute to your margin account (in dollars) at t=0? What will be your rate of return at the end of the year holding period if the price is $30 per share? If the maintenance margin is 30%, at what stock price you will receive a margin call?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)?2. Suppose you purchase 500 shares of stock at $48 per share with an initial cash investment of $8,000. If your broker requires a 30% maintenance margin, at what share price will you be subject to a margin call? Suppose the call money rate is 5% and you are charged with a 1.5% premium over this rate. Calculate your return on investment if the share price is $56 per share in 5 months. What is the effective annual return rate if you sell the shares at $56 per share in 5 months?
- 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 just bought $8,000 worth of a stock priced at $40 per share using 50% initial margin. The broker charges 6% on the margin loan and requires a 30% maintenance margin. At what price would you expect to get a margin call? To restore your margin to the initial margin level, how much would you need to deposit?The Baron Basketball Company (BBC) earned $11 a share last year and paid a dividend of $7 a share. Next year, you expect BBC to earn $12 and continue its payout ratio. Assume that you expect to sell the stock for $135 a year from now. Do not round intermediate calculations. Round your answers to the nearest cent. a. If you require 10 percent on this stock, how much would you be willing to pay for it? 24 b. If you expect a selling price of $106 and require an 8 percent return on this investment, how much would you pay for the BBC stock? 24
- Holtzman Clothiers's stock currently sells for $25.00 a share. It just paid a dividend of $2.50 a share (i.e., Do = $2.50). The dividend is expected to grow at a constant rate of 4% a year. What stock price is expected 1 year from now? Round your answer to the nearest cent. $ What is the required rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %Holtzman Clothiers's stock currently sells for $35 a share. It just paid a dividend of $2.25 a share (i.e., D0 = $2.25). The dividend is expected to grow at a constant rate of 9% a year. What is the required rate of return? Round your answer to two decimal places. Do not round your intermediate calculations.Suppose you have $60,000 to invest. You're considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $100 per share. You also notice that a call option with a strike price of $100 and six months to maturity is available. The premium is $5. MMEE pays no dividends. What is your annualized return from these two investments if, in six months, MMEE is selling for $106 per share? What about $96 per share?