As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March10, 2020 is $4.23. You believe GME is overvalued and decide to short-sell GME. You have $156,912 worthof Treasury Bills in your brokerage account that can be used as collateral. Your broker requires an initialmargin of 50% and a maintenance margin of 43%. You must also set aside 100% of the cash proceeds ascollateral. You decide to short as many shares as you can with the collateral you have. Pay special attentionthat you cannot purchase/sell/trade fractional shares.How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, byhow much the stock price could move in the "wrong" direction before you receive a margin call? Enter anumber with two decimal points.

Let us determine the number of shares you shorted using the formula below:

How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points.

How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

On December 31, 2020, Pronghorn Company signed a $1,284,300 note to Stellar Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Pronghorn’s financial situation worsened. On December 31, 2022, Stellar Bank determined that it was probable that the company would pay back only $770,580 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,284,300 loan. Determine the amount of cash Pronghorn received from the loan on December 31, 2020. (Round present value factors to 5 decimal places, e.g. 0.52513 and final answer to 0 decimal places, e.g. 5,275.)
On December 31, 2020, Iva Majoli Company borrowed $62,092 from Paris Bank, signing a 5-year, $100,000 zero-interest-bearing note. The note was issued to yield 10% interest. Unfortunately, during 2022, Majoli began to experience financial difficulty. As a result, at December 31, 2022, Paris Bank determined that it was probable that it would receive back only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%. Instructions a. Prepare the entry to record the issuance of the loan by Paris Bank on December 31, 2020. b. Prepare the entry, if any, to record the impairment of the loan on December 31, 2022, by Paris Bank.
Cullumber Corporation issued a 4-year, $38,000, 4% note to Greenbush Company on January 1, 2020, and received a computer that normally sells for $30,773. The note requires annual interest payments each December 31. The market rate of interest for a note of similar risk is 10%. Prepare Cullumber’s journal entries for (a) the January 1 issuance and (b) the December 31 interest. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No.DateAccount Titles and ExplanationDebitCredit(a) (b)
On December 31, 2020, London Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower woresend because of lower revenue On December 31, 2022, the bank determined that the borrower would oay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is .57 for five periods and .71 for three periods. The present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. 1. What is the amount of cash paid to the borrower on December 31, 2020? a. 4,400,000 b. 4,500,000 c. 5,000,000 d. 4,650,000 2. What is the carrying amount of the loan receivable on December 31, 2022? a. 4,650,000 b. 4,790,000 c. 4,772,960 d. 4,720,000 3. What is the impairment loss on loan…
On December 31, 2020, JKL Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31 ,2022, the bank determined that the borrower would pay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods. In addition, the present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. Compute for the carrying amount of the loan receivable on December 31, 2022.
On December 31, 2020, JKL Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31 ,2022, the bank determined that the borrower would pay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods. In addition, the present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. Compute for the impairment loss on loan receivable to be recognized in 2022?
On December 31, 2020, JKL Bank granted a P5,000,000 loan to a borrower with 10% stated rate payable annually and maturing in 5 years. The loan was discounted at the market interest rate of 12%. Unfortunately, the financial condition of the borrower worsened because of lower revenue. On December 31 ,2022, the bank determined that the borrower would pay back only P3,000,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid on the P5,000,000 loan. The present value of 1 at 12% is 0.57 for five periods and 0.71 for three periods. In addition, the present value of an ordinary annuity of 1 at 12% is 3.60 for five periods and 2.40 for three periods. Compute for the amount of cash paid to the borrower on December 31, 2020
A company is planning to sell its 90-day commercial paper to investors by offering an 8.4 percentyield. If the face value of a three-month Treasury bill is GHS1000 which is also selling at GHS950,the credit risk premium is estimated to be 0.6 percent, and there is a 0.4 percent tax adjustment,then what is the liquidity premium on the commercial pape
On January 1, 2021, Saltimbocca Corporation borrowed $192,772 from Morgan Stanley. Under the terms of the loan, Saltimbocca will pay $500,000 to Morgan Stanley in ten years (on December 31, 2030), which implies that the yield to maturity (or implicit interest rate) on the loan is 10.0%. What is Saltimbocca’s interest expense on the loan for the year ended December 31, 2023 (the third year of the loan)? (Hint: Round to the nearest dollar. Do not use any dollar signs, commas, or decimals in your answer).
On January 2, 2020, Parton Company issues a 5-year, $10,000,000 note at LIBOR, with interest paid annually. The variable rate is reset at the end of each year. The LIBOR rate for the first year is 5.8%. Parton Company decides it prefers fixed-rate financing and wants to lock in a rate of 6%. As a result, Parton enters into an interest rate swap to pay 6% fixed and receive LIBOR based on $10 million. The variable rate is reset to 6.6% on January 2, 2021. Instructions a. Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2020. b. Compute the net interest expense to be reported for this note and related swap transactions as of December 31, 2021.
On December 31, 2020, Conchita Martinez Company signed a $1,000,000 note to Sauk City Bank. The market interest rate at that time was 12%. The stated interest rate on the note was 10%, payable annually. The note matures in 5 years. Unfortunately, because of lower sales, Conchita Martinez’s financial situation worsened. On December 31, 2022, Sauk City Bank determined that it was probable that the company would pay back only $600,000 of the principal at maturity. However, it was considered likely that interest would continue to be paid, based on the $1,000,000 loan. Instructions a. Determine the amount of cash Conchita Martinez received from the loan on December 31, 2020. b. Prepare a note amortization schedule for Sauk City Bank up to December 31, 2022. c. Determine the loss on impairment that Sauk City Bank should recognize on December 31, 2022.
The Moustache Company is replacing most of the windows in its Alden factory by purchasing them under a note agreement with the Blattner Window Design Company on January 1, 2019. Moustache financed $37,908,000, and the note agreement will require $10 million in annual payments starting on December 31, 2019 and continuing for a total of four more years(final payment December 31, 2023). Blattner will charge Moustache the market interest rate of 10% compounded annually. What is the amount of the 2020 interest expense? A. $3,290,800 B. $2,790,800 C. $4,000,000 D. $3,169,880

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