Question

Three months ago, you purchased 100 shares of stock on margin. The initial margin requirement on your account is 70 percent and the maintenance margin is 40 percent. The call money rate is 4.2%/year and you pay 2.0% above that rate. The purchase price was $22 per share. Today, you sold these shares for $25.00 each. What is your annualized rate of return?

Answer #1

**Solution
:**

Here, First we need to calculate the Initial investment as follows :

Initial investment = 100 * $22 * 0.70 = $1,540

Next, we will calculate the Loan payment as follows,

Loan payment = [ 100 * $22 * ( 1 - 0.70 ) ] * [ 1 + ( 0.042 + 0.02 ) ]^3/12

= $670.00

Now, we can calculate the Holding period return ( HPR ) as,

HPR = [ ( 100 * $25 ) - $1,540 - $670.00 ] / $1,540

HPR = 0.1883

Finally, we can calculate the effective annual rate ( EAR ) as,

EAR = ( 1 + 0.1883 )^12/3 - 1

**EAR = 99.39%**

**The annualized return is 99.39%**

You purchased 800 shares of stock for $49.20 a share. The
initial margin requirement is 65 percent and the maintenance margin
is 35 percent. What is the lowest the stock price can go before you
receive a margin call? What is your return if price per share goes
up to $60 (assume no interest)?
$9.27; 40%
$26.49; 25.67%
$17.22; 50%
$26.49; 33.77%

Your brother purchased 400 shares of stock for $28.50 a share.
The initial margin requirement is 60% and the maintenance margin is
30%. What is the maximum percentage decrease that can occur in the
stock price before you receive a margin call?

The initial margin requirement on a stock purchase is 49%. You
fully use the margin allowed to purchase 200 shares of TSLA at
$325.00. The maintenance margin requirement is
25%. At which share price would first
receive a Margin Call? Enter your answer
in the box below. Round your answer to
two decimals.

Using a margin account, you purchased 100 shares at a price of
$100 with an initial margin requirement of 60% and a maintenance
margin requirement of 30% on the margin position.
You would get a margin call at a stock price of __________ and
would have to deposit _______ with the broker.
Group of answer choices
$57.14; $1,714
$57.14; $3,428
$30.77; $2,154
$30.77; $3,077
$57.14; $4,000

You short-sell 50 shares of XYZ stock at $100 per share. Your
broker's initial margin requirement is 50% of the value of your
short position. You put up cash to satisfy the initial margin
requirement.
a) What will be your rate of return (after 1 year) if XYZ stock
sells at $110 a share? Assume that you do not earn any interest on
your funds in the margin account and that the stock pays a dividend
of $1.50 a share...

You purchased 200 shares of Frozen Foods stock for $42 a share
eight months ago. Today, you received a dividend of $0.40 a share
and also sold the shares for $46 each. What was your effective
annualized rate of return on this investment?

You purchased 100 shares of common stock on margin at $45 per
share. Assume the initial margin is 50% and the stock pays no
dividend. What would the maintenance margin be if a margin call is
made at a stock price of $30? Ignore interest on margin. A.0.33
B.0.55 C.0.43 D.0.23 E.0.253. Assume you purchased 200 shares of GE
common stock on margin at $70 per share from your broker. If the
initial margin is 55%, how much did you...

You purchased 100 shares of common stock on margin at $40 per
share. Assume the initial margin is 50% and the stock pays no
dividend. What would the maintenance margin be of a margin call is
made at a stock price of $25? Ignore interest on margin. Make sure
that you interpret your numerical answer (i.e. explain why would
you get the call at this rate).

You purchase 100 shares of a stock at $120 per share, on a
margin of 55 percent.
The stock declines to $90.
a.What is your initial margin position
(equity and loan)?
b.When the price declines to $90 per
share will you be called upon to put up more margin to meet the 35
percent minimum maintenance margin requirement?
If yes, how much equity would you need
to add to your account?
If no, how much equity do you have over...

Use the following to answer the next three questions. Three
months ago, you purchased 1000 shares of ABC stock on margin at
$15/share. The initial and maintenance margins are 60% and 40%,
respectively. Your broker charges you a 6% annual interest rate on
borrowed funds. You've received a $1 dividend per share over the
course of your investment. ABC trades for $12/share today. Find
your current margin. Round intermediate steps and your final answer
to four decimals and enter your...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 5 minutes ago

asked 8 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 11 minutes ago

asked 16 minutes ago

asked 21 minutes ago

asked 30 minutes ago

asked 34 minutes ago

asked 52 minutes ago

asked 1 hour ago

asked 1 hour ago