You are interested in short selling 200 shares of Queen Company Limited. The initial margin is 55% and the maintenance margin is 35%. You sell the shares at Sxx per share (xx is the last two digits of your student ID number, if the last two digits are 00, use 100). i) ii) iii) How much money do you have to add to your account and how much money is in your account in total? At what price will you get a margin call? If the price of the stock immediately increased by 30%, and you bought it back at that price, how much you lose (in $) and what would be the rate of return (in %) on your investment (assume no fees or interest costs)?

You are interested in short selling 200 shares of Queen Company Limited. The initial margin is 55% and the maintenance margin is 35%. You sell the shares at Sxx per share (xx is the last two digits of your student ID number, if the last two digits are 00, use 100). i) ii) iii) How much money do you have to add to your account and how much money is in your account in total? At what price will you get a margin call? If the price of the stock immediately increased by 30%, and you bought it back at that price, how much you lose (in $) and what would be the rate of return (in %) on your investment (assume no fees or interest costs)?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question 4 You open a brokerage account and purchases 1000 shares of PepsiCo (PEP) at $50 per share. You borrow $20,000 from your broker to help pay for the purchase. The interest rate on the loan is 10%. a) What is the margin in your account when you first purchase the share? b) If the share price falls to $40 per share by the end of the year, 1) What is the remaining margin in your account? 2) If the maintenance margin requirement is 30%, will you receive a margin call? 3) What is the rate of return on your investment? c) Consider the following limit order book for PEP stock. The last trade in the stock occurred at a price of $49. If you use a market order to buy 200 additional PEP shares, at what price will it be filled? Limit buy orders Price $48.75 $48.70 $48.65 $48.60 Shares 500 600 630 550 Limit sell orders Price $48.80 $48.85 $48.90 $48.95 Shares 200 500 400 1000
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.
O b. Equity. O c. Fixed income payments. O d. Security. Clear my choice Zinedine Zidane purchased 100 shares of Real Madrid common stock at $40 per share. Assume that the initial margin is 55% and the maintenance margin equals 25%. At which of these prices will Zidane face a margin call? O a. $29.3 Ob. $40 Q C. $24 O d. $15 近
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.)
You sell short 300 shares of Microsoft that are currently selling at $30 per share. You post the 50% margin required on the short sale. If you earn no interest on the funds in your margin account, what will be your rate of return after 1 year if Microsoft is selling at $29? (Ignore any dividends.) Select one: а. 20% b. 15% C. 6.67% d. 10%
Suppose you buy 200 shares of Kohls stock at a price of $26 47 per share You use some of your own money and borrow using a margin account for as much as you can Your inibal margin s 50% You borrow at a rate of 85%. You sell your Kohl's stock 1 year later for $30 50 There were no dividends and no commissions How much interest must you pay? O A $75.50 OB.$150 OC $225 OD. $275 QUESTION 23 Suppose you buy 200 shares of Kohis stock at a pnce of $26 47 per share You use some of your own money and borrow using a margin account for as much as you can Your initial margin is 50% You borrow at a rate of 85% You sell your Kohr's stock 1 year later for $30 50 There were no dividends and no commnsions What are your capital gains from selling the stock? O A $595 OB $710 24 OC. $725 OD. $806
Question A, B & C please. A study guide question. Suppose you sell short Tesla which is currently trading at $300 per share. You put $30,000 as cash into your brokerage account with an initial margin of 50%. The maintenance margin is 35%. a)How many shares of Tesla can you sell short? b)How far can the stock price increase before you get a margin call? c)Assume Tesla pays a dividend of $10 per share after you sell it short. At what price, will you get a margin call?
2. 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?
Q.Jenny purchases shares of Shrimp Co. for $32.50 using a margin account with a 50% initial margin. Assuming the maintenance margin is 35%, at what price will Jenny receive a margin call? A.$16.25 B.$27.50 C.$31.50 D.$25.00
.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.
Suppose that Nintendo Co., Ltd. (NTDOY) is currently trading at $180 per share. Mark buys 200 shares, using $23,000 of his own money and borrowing the remainder of the purchase price from his broker, Shin. If the maintenance margin is 45%, how far could the stock price fall before Mark would get a margin call? A. $131.31 B. $125.68 C. $121.59 D. $118.18
points Return to question Item 7 Problem 3-19 (Algo) You are bearish on Telecom and decide to sell short 100 shares at the current market price of $36 per share. Required: a. How much in cash or securities must you put into your brokerage account if the broker’s initial margin requirement is 50% of the value of the short position? b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.)

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