Question

Suppose you buy a round lot of Francesca Industries stock (100 shares) on 55 percent margin when the stock is selling at $30 a share. The broker charges a 12 percent annual interest rate, and commissions are 2 percent of the stock value on the purchase and sale. A year later you receive a $0.65 per share dividend and sell the stock for $41 a share. What is your rate of return on Francesca Industries? Do not round intermediate calculations. Round your answer to two decimal places.

Answer #1

Stock value is = (100*30) = $ 3,000/. |

Initial margin is = (3000*55%) = $ 1,650/. |

Commission on purchase is = (3000*2%) = $ 60/. |

Interest Charged For one year = (3000*45%*12%) = $ 162/. |

Commision on Sales = (100*41*2%) = $ 82/. |

Dividend Received = (100*0.65) = $ 65/. |

Increment in Price Profit is = (100*(41-30)) = $ 1,100/. |

Net Income on Sale = Dividend + Increment in Price - Commission on Sale - Interest |

Net Income on Sale = (65+1100-82-162) |

Net Income on Sale = $ 921/. |

Net Investment = Initial Margin + Commision on Purchase |

Net Investment = (1650+60) = $ 1,710/. |

Rate of Return is = (921/1710)*100 |

Rate of Return is = 53.86% (Rounded off) |

eBook
Problem 3-03
Suppose you buy a round lot of Francesca Industries stock (100
shares) on 60 percent margin when the stock is selling at $20 a
share. The broker charges a 13 percent annual interest rate, and
commissions are 3 percent of the stock value on the purchase and
sale. A year later you receive a $0.60 per share dividend and sell
the stock for $32 a share. What is your rate of return on Francesca
Industries? Do not...

suppose you buy a round lot of stock on 53.46% margin when it
is selling at $55 a share. The broker charges a 10.81% annual
interest rate and commissions are 3% of the total stock value on
both the purchase and sale. If at year end you receive a $1.10 per
share dividend and sell the stock for $57.50 what is your dollar
profit or loss in this investment? show your computations

You decide to sell 1,000 shares of Marston Industries short when
it is selling at ¢35. Your broker requires an initial margin
deposit of 55 percent with no commission on the sale and a 6
percent interest rate on your margin loan. While you are short,
Marston Industries pays a 75 pesewas per share dividend. At the end
of one year you buy Marston Industries shares to cover your short
sale at ¢30 and are charged a commission of ¢15....

Suppose you buy 100 shares of stock XYZ at $10 a share with a
margin of 50%. You also buy 200 shares of stock ABC at $50 a share
with an 60% margin. You are very sure that, in six month, the price
of the first stock would be $15 because you got insider
information, but you are not so sure about the price of the second
stock. Suppose you want to achieve a 20% return from your
portfolio, then...

Suppose you buy 100 shares of stock XYZ at $10 a share with a
margin of 50%. You also buy 200 shares of stock ABC at $50 a share
with an 60% margin. You are very sure that,
in six month, the price
of the first stock would be $15 because you got insider
information, but you are not so sure about the price of the second
stock. Suppose you want to achieve a 20% return from your
portfolio, then...

Suppose you buy 100 shares of stock XYZ at $10 a share with a
margin of 50%. You also buy 200 shares of stock ABC at $50 a share
with an 60% margin. You are very sure that,
in six month, the price
of the first stock would be $15 because you got insider
information, but you are not so sure about the price of the second
stock. Suppose you want to achieve a 20% return from your
portfolio, then...

1.) Suppose you buy 100 shares of Green Acre Industries on
margin when the share price for Green Acre Industries share price
is $33. One year later Green Acre Industries is trading at $40 a
share. What is the return on your investment (expressed as a
percent)? Assume that the initial margin requirement is 60%, Green
Acre Industries does not pay a dividend, call money rates is 5.0%
and the spread is 1.5%.

On January 1, you sold short one round lot (that is, 100 shares)
of Lowe's stock at $27.70 per share. On March 1, a dividend of
$3.30 per share was paid. On April 1, you covered the short sale by
buying the stock at a price of $22.00 per share and returned your
borrowed shares. You paid 25 cents per share in commissions for
each transaction. What is the value of your account on April 1
after returning borrowed shares? (Round...

You borrowed $10,000 on margin to buy shares in Pai Corp, which
is now selling at $20 per share. Your account starts at the initial
margin requirement of 50%. The maintenance margin is 35%. Two days
later, the stock price falls to $15 per share.
A. What is the initial value of stock? (Hint: use initial
margin=Equity/value of stock)
B. What is your margin at $15 (round to nearest percent:
54.72%>>55%) ?
C. Will you receive a margin call (Yes/No)? ...

You decide to sell short 100 shares of Charlotte Horse Farms
when it is selling at its yearly high of $53. Your broker tells you
that your margin requirement is 55 percent and that the commission
on the purchase is $150. While you are short the stock, Charlotte
pays a $2.25 per share dividend. At the end of one year, you buy
100 shares of Charlotte at $42 to close out your position and are
charged a commission of $140...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 13 minutes ago

asked 14 minutes ago

asked 14 minutes ago

asked 18 minutes ago

asked 22 minutes ago

asked 27 minutes ago

asked 35 minutes ago

asked 58 minutes ago

asked 59 minutes ago

asked 1 hour ago

asked 1 hour ago