Question

Intro

The price of Facebook stock is currently at $30 and you decide to buy 200 shares on margin. You borrow $3,000 from your broker and finance the remainder of the purchase with your own cash.

Attempt 1/1 for 10 pts.

Part 1

What is your initial percentage margin?

Move on

Attempt 1/1 for 10 pts.

Part 2

If the price rises to $35, what is the net return?

3+ Decimals

Answer 1

  

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Answer 1)

Initial Margin = Total Investment - Loan / Total investment

= (200 * 30) - 3000 / (200 * 30)

= 50%

Answer 2)

Return = (Closing Rate - purchase Price) * No of shares / Own Investment

= (35 - 30) * 200/ 3000

= 1000 / 3000

= 33.33%

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