Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 3, Problem 16PS
Old Economy Traders opened an account to short-sell 1.000 shares of Internet Dreams from true previous question. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $40 to $50, and the stock has paid n dividend of $2 per share. (LO 3-4)
a. What is the remaining margin in the account?
b. If’ the maintenance margin requirement is 30%, will Old Economy receive a margin call?
c. What is the rate of
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Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $40 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $40 to $50, and the stock has paid a dividend of $2 per share.
Required:
a. What is the remaining margin in the account in dollars?
b-1. What is the margin percentage on the short position?
b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?multiple choice
Yes
No
c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign.)
Old Economy Traders opened an account to short sell 1,500 shares of Internet Dreams at $50 per share. The initial margin
requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $50 to $65, and
the stock has paid a dividend of $1.50 per share.
a. What is the remaining margin in the account? (Round your answer to the nearest whole number.)
Remaining margin
b. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?
Yes
O No
c. What is the rate of return on the investment? (Round your answer to 2 decimal places. Negative value should be indicated by a
minus sign.)
Rate of return
%
Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams
at $35 per share. The initial margin requirement was 50%. (The margin account pays no
interest.) A year later, the price of Internet Dreams has risen from $35 to $41.50, and the
stock has paid a dividend of $4.40 per share.
a. What is the remaining margin in the account?
Remaining margin
b-1. What is the margin on the short position? (Round your answer to 2 decimal places.)
Short margin
b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin
call?
Yes
No
c. What is the rate of return on the investment? (Negative value should be indicated by
a minus sign. Round your answer to 2 decimal places.)
Rate of return
%
Chapter 3 Solutions
Essentials Of Investments
Ch. 3.8 - Suppose you by 100 shares of stock initially...Ch. 3.8 - Repeat Question 1 assuming your initial margin was...Ch. 3.9 - Suppose you sell short 100 shares of stock...Ch. 3.9 - Repeat Question t (b) but now assume that the...Ch. 3 - Prob. 1PSCh. 3 - What are some different components of the...Ch. 3 - Prob. 3PSCh. 3 - Prob. 4PSCh. 3 - In what cirecumstances are private placements more...Ch. 3 - Prob. 6PS
Ch. 3 - Prob. 8PSCh. 3 - How do margin trades magnify both the upside...Ch. 3 - A market order has: (LO 3-2) a. Price uncertainty...Ch. 3 - Where would an illiquid security in a developing...Ch. 3 - Are the following statements true or false? If...Ch. 3 - Prob. 13PSCh. 3 - Prob. 14PSCh. 3 - Prob. 15PSCh. 3 - Old Economy Traders opened an account to...Ch. 3 - Prob. 17PSCh. 3 - You are bullish on Telecom stock. The current...Ch. 3 - Prob. 19PSCh. 3 - Prob. 20PSCh. 3 - Prob. 21PSCh. 3 - Prob. 22PSCh. 3 - Prob. 23PSCh. 3 - Prob. 24CCh. 3 - Prob. 25CCh. 3 - Are all of the brokerage firms suitable ii you...Ch. 3 - Choose two of the firms listed. Assume that you...Ch. 3 - Prob. 4WM
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