Jason Momoa put up $18,000 to take a long position in XYZ stock with a price of $30. a) If the initial margin rate on the position is 60%, how many shares can you purchase? b) What dollar amount are you borrowing from the brokerage firm? Include working
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Jason Momoa put up $18,000 to take a long position in XYZ stock with a price of $30.
a) If the initial margin rate on the position is 60%, how many shares can you purchase?
b) What dollar amount are you borrowing from the brokerage firm?
Include working
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- Shakee Venture wants to purchase 1,000 shares of an Internet technologystock for $15 a share. She figures that she needs $15,000 plus $90 brokeragecommission to purchase the stock. She currently has $8,000 of liquidity inher money market account.a. What can Shakee borrow on margin in order to make the transaction?b. If the stock jumps to $50 per share within a week, how much will Shakeerealize in profit after paying her broker?c. If the stock dropped to $5 per share, rather than increasing to $50,and the broker put in the margin call, how much must Shakee pay thebroker?d. Based on beginning account balance of $8,000, what is Shakee’s loss?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 borrow from the broker? Assume you sold short 100 shares of common stock at $40 per share. The initial margin is 50%. What would be the maintenance margin if a margin call is made at a stock price of $50?Suppose that Brue currently is selling at $50 per share. You buy 900 shares using $36,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 7%. What is the rate of return on your margined position if Brue is selling after ONE year at (a)$56; (b)$50; and (c)$44?
- You think that the stock of Fleetwood Corp is likely to rise within the next six months from its current price ($19.00 bid and $20.00 ask), and you want to maximize the amount of profit from your investment. So, you will use a margin account to borrow on margin in order to buy as many shares as you can. Your initial margin requirement is 45%, and you have $90,000 of your own money to invest in the shares. The minimum (maintenance) margin is 30%, and Fleetwood does not pay dividends. (Ignore interest for this problem.) If you buy Fleetwood on margin with the maximum margin loan, what is the maximum number of shares you can buy? Suppose you bought the maximum number of shares of Fleetwood as in (1). Assume that immediately after your purchase, Fleetwood’s share price drops to $18.00 per share. Calculate your new margin. Will you receive a margin call? How far can the price drop before you will receive a margin call? If the stock price falls to $14.00, you calculate that you would…You want to purchase IBM stock at $130 from your broker using as little of your own money as possible. If initial margin is 50% and you have $19, 600to invest, how many shares can you buy?An investor buys $20,000 worth of a stock priced at $25 per share using 80% initial margin. The broker charges 5% on the margin loan and requires a 40% maintenance margin. The stock pays a $0.40 per share dividend in one year and then the stock is sold at $35 per share. What was the investor's rate of return?
- You’ve borrowed $20,000 on margin to buy shares in Ixnay, which is now selling at $40 per share. Your account starts at the initial margin requirement of 50%. The maintenance margin is 35%. Two days later, the stock price falls to $35 per share.a. Will you receive a margin call?b. How low can the price of Ixnay shares fall before you receive a margin call?Rob has deposited K40,000 in his margin account and he wants to use the money to buy shares of the ABC company. The initial margin requirement is 40% and ABC’s stock price is currently K50. Ignore taxes, commissions and interest on the amount borrowed. What is Rob’s percentage return if he buys the stock on margin and the price increases to K55? And If the maintenance margin is 30%, at what price would Rob receive a margin call from his broker?Suppose that you opened a margin account (margin requirement = 60%) with your brokerage firm. Through this account, you invested in 100 shares of Mercer Inc. stocks at $80 per share a year ago. While you hold the stocks (1 year), the firm paid out $0.50 dividend per share every quarter. If you sell the stocks at $90 per share today, what is the percentage return for your investment? Assume that the commission rate is 1% of the purchase and sale price, and you need to pay 2% interest on the borrowed fund.
- You want to take a long position on a stock. It costs $2,500 for 1,000 shares, so you deposit $1,250 in your margin account that has a 50% initial margin requirement. You sell the stock for $1000 at the end of one year. Assume there are no dividends and the interest charged for the loan is $125 for the year. Find your yield rate.You are about to purchase OSTK, which is currently trading at $20 per share. You have $5,000 of your own to invest. You borrow an additional $5,000 from your broker and invest $10,000 in the stock. How far does the stock price have to fall for you to get a margin call if the maintenance margin requirement is 35%?Suppose that Brue currently is selling at $50 per share. You buy 900 shares using $36,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 7%. What is the percentage increase in the net worth of your brokerage account if the price of Brue immediately changes to (a) $56; (b) $50; and (c)$44?
