a stock portfolio worth $500,000,000 with a margin. The agreement with the securities company states that the initial margin is 50% and the margin call is 30%. The commission fee for buying transactions is 0.25% and for selling transactions is 0.35%, while the loan interest rate is 1.5% per month. Taking into account all transaction costs, calculate the ratio of debt and funds that Aisyah must prepare to increase equity if her portfolio declines to $350,000,000 in two months.
a stock portfolio worth $500,000,000 with a margin. The agreement with the securities company states that the initial margin is 50% and the margin call is 30%. The commission fee for buying transactions is 0.25% and for selling transactions is 0.35%, while the loan interest rate is 1.5% per month. Taking into account all transaction costs, calculate the ratio of debt and funds that Aisyah must prepare to increase equity if her portfolio declines to $350,000,000 in two months.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter23: Other Topics In Working Capital Management
Section: Chapter Questions
Problem 11MC
Related questions
Question
Please use excel to provide the answer and calculation
Kelly forms a stock portfolio worth $500,000,000 with a margin. The agreement with the securities company states that the initial margin is 50% and the margin call is 30%. The commission fee for buying transactions is 0.25% and for selling transactions is 0.35%, while the loan interest rate is 1.5% per month. Taking into account all transaction costs, calculate the ratio of debt and funds that Aisyah must prepare to increase equity if her portfolio declines to $350,000,000 in two months.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Financial Accounting
Accounting
ISBN:
9781337272124
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning