You pald cash for $800 worth of stock a year ago. Today the portfolio is worth $1,150. a. What rate of return did you earn on the Investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return % b. Now suppose that you bought the same stock but bought it on margin. The initial margin requirement was 55%. Recalculate your rate of return, ignoring any Interest due. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return c. Recalculate the rates of return for a cash purchase in the event that the stock is worth $750 today. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return

You pald cash for $800 worth of stock a year ago. Today the portfolio is worth $1,150. a. What rate of return did you earn on the Investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return % b. Now suppose that you bought the same stock but bought it on margin. The initial margin requirement was 55%. Recalculate your rate of return, ignoring any Interest due. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return c. Recalculate the rates of return for a cash purchase in the event that the stock is worth $750 today. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return

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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You paid cash for $1,600 worth of stock a year ago. Today the portfolio is worth $2,626. a. What rate of return did you earn on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return % b. Now suppose that you bought the same stock but bought it on margin. The initial margin requirement was 65%. Recalculate your rate of return, ignoring any interest due. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return % c. Recalculate the rates of return for a cash purchase in the event that the stock is worth $825 today. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return % d. Recalculate the rates of return for a margin purchase in the event that the stock is worth $825 today. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Rate of return %
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.
You short-sell a stock and currently have 1/3 of the stock's value as collateral. Over the next 8 months, the stock that you shorted has a return of -23%. What is the EAR of your investment? The easiest way to do this one is to start with the multiplier, then apply it to the return on the asset to get the return on your equity, then annualize that return. The correct answer is: 1.20
What makes for a good investment? Use the approximate yield formula or a financial calculator to rank the following investments according to their expected returns. Buy a stock for $30 a share, hold it for three years, and then sell it for $60 a share (the stock pays annual dividends of $2 a share). Buy a security for $40, hold it for two years, and then sell it for $100 (current income on this security is zero). Buy a one-year, 5 percent note for $1,000 (assume that the note has a $1,000 par value and that it will be held to maturity).
Suppose you bought XYZ stock 1 year ago for $6.54 per share and sell it at $2.79. You also pay a commission of $0.35 per share on your sale. What is the total return on your investment? The total return is %?
Which of the following would offer the best return on investment? Assume that you buy $5,000 in stock in all three cases, and ignore interest and transaction costs in all your calculations. Also assume that decimal number of stocks can be bought so all the amount discussed is invested into the stocks in all three cases. Buy a stock at $90 without margin, and sell it a year later at $105. Buy a stock at $70 with 50% margin (50% loan), and sell it a year later at $85. Buy a stock at $65 with 25% margin (75% loan), and sell it a year later at $80. Alternative offers the best return on the investment.
Consider that an investor has a total of £300,000 to invest. The investor invested £200,000 in asset A and the remainder in asset B. Assume that the daily volatility of asset A is 2%, the daily volatility of asset B is 3% and that the coefficient of correlation between their returns is 0.4. What is the 5-day 99% VaR for the portfolio? [Note that N- 1(0.01) = 2.326]
Suppose you have $375,000 in cash, and you decide to borrow another $63,750 at a 7% interest rate to invest in the stock market. You invest the entire $438,750 in a portfolio J with a 20% expected return and a 28% volatility. a. What is the expected return and volatility (standard deviation) of your investment? b. What is your realized return if J goes up 39% over the year? c. What return do you realize if J falls by 19% over the year?
(I want the answer in 60 minutes or within ) You have observed the following returns over time: Assume that the risk-free rate is 4% and the market risk premium is 2%. a. What are the betas of Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: Stock Y: b.What are the required rates of return on Stocks X and Y? Do not round intermediate calculations. Round your answers to two decimal places. Stock X: % Stock Y: % c. What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Do not round intermediate calculations. Round your answer to two decimal places.
An investor is considering purchasing a share of stock. Earnings are expected to be $6 per share and the price next year is expected to be $100. Suppose risk-free interest rates fall and the required rate of return decreases from 7% to 6%. Nothing else changes. What is new price the investor is wiling to pay for the stock? Answer in dollars and do not enter a $ sign. Round to two decimal places. please explain step by step
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)?
You got an offer to by a share. The price is 20p and the market is expected to grow by 5% in a year until you sell the share after having received 1p in dividend. Your required rate of return is 12%. Will you accept the offer? Make proper calculations and give an explanation for your decision.