Global Investments Essay

685 WordsAug 30, 20133 Pages
1. Recently, you sold 1,000 shares of stock for $21,400. The sale was a short sale with an initial margin requirement of 60 percent. The maintenance margin is 30 percent. The stock is currently trading at $27.50 a share. What is your current margin position in this stock? Assets = $21,400 Equity = $21,400 x .60 = $12,840 Short position = 1,000 x $27.50 = $27,500 Account equity = $21,400 + $12,840 - $27,500 = $6,740 Margin position = $6,740 / $27,500 = 24.51 % 2. Matt short sold 500 shares of Tall Pines stock at $19 a share at an initial margin of 65 percent. The maintenance margin is 35 percent. What is the highest the stock price can go before he receives a margin call? Assets = 500 x $19 = $9,500 Equity = $9,500 x .65 =…show more content…
What if the stock price declines by 25%? (note: 3% is annualized effective rate). 900 x $62.20 = $55,980 Assets $55980 x .70 = $41985 Equity $55980 – $41985 = $13995 Liability 3 % of 13995 = 209.93 $14204.93 + $41985 = $56189.93 Stock price increases by 25% = $77.75 per share Stock price decreases by 25% = $46.65 per share $69,975 -$56189.93 = $13785.07/$56189.93 = 24.53% when increased by 25% $41985 - $56189.93 = - $14,204.93/$56189.93 = -25.28% when decreased by 25% 6. Assume the DJIA closed at 12,487 last night. The divisor is 0.123017848. Assume that 29 of the stocks in the index were unchanged today. One stock increased in value from $54.80 a share yesterday to $56.90 a share today. What is the DJIA index value at the close of trading today? Initial value = 30 x $54.80 = $1644 Final value = (29 x $54.80) + $56.90 = $1646.10 Initial index value = $1644/30 = 54.8 Final index value = $1646.10/30 = 54.87 7. An index consists of the following securities Stock | Shares Outstanding | Yesterday's Price | Today's Price | A | 1,000 | $32 | $38 | B | 4,000 | $22 | $23 | C | 6,000 | $57 | $55 | * Suppose the index is price-weighted. Current index divisor is 2.7. If after today, Stock B experience a 3-for-1 split. What is the new divisor? ($32+$22+$57)/3 = 37 $23/3 = $7.6 ($38+$7.6+$55)/d = 37 d = 2.72 * If the index is value-weighted, what is the index level? Use yesterday as a base. Assume
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