(A) Adequate information: The current price in the market accounts for $50. The money available for investment is $5,000. The investor also borrowed money from the broker which amounts to $5,000 at a 8 % rate of interest. To calculate: The annual rate of return that must be earned by the investor if there is an increase of 10% in the telecom stock price Introduction: Rate of return refers to the ratio of loss or profit ascertained in the financial year with respect to the investment which is generally expressed in percentage of decrease or increase in the investment's value during the given period of time.

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Answer 1

Question

Chapter 3, Problem 9PS

Summary Introduction

(A)

Adequate information:

The current price in the market accounts for $50. The money available for investment is $5,000. The investor also borrowed money from the broker which amounts to $5,000 at a 8 % rate of interest.

To calculate:

The annual rate of return that must be earned by the investor if there is an increase of 10% in the telecom stock price

Introduction:

Rate of return refers to the ratio of loss or profit ascertained in the financial year with respect to the investment which is generally expressed in percentage of decrease or increase in the investment's value during the given period of time.

Summary Introduction

(B)

To calculate:

The fall in the price of the telecom stock that enables the investor to get margin call.

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

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You are bullish on Telecom stock. The current market price is $250 per share, and you have $22,000 of your own to invest. You borrow an additional $22,000 from your broker at an interest rate of 6% per year and invest $44,000 in the stock. Required: What will be your rate of return if the price of Telecom stock goes up by 16% during the next year? The stock currently pays no dividends.

You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker at an interest rate of 8% per year and invest $10,000 in the stock.a. What will be your rate of return if the price of Telecom stock goes up by 10% during the next year? The stock currently pays no dividends.b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately.

You are bullish on Telecom stock. The current market price is $80 per share, and you have $12,000 of your own to invest. You borrow an additional $12,000 from your broker at an interest rate of 6% per year and invest $24,000 in the stock. a. What will be your rate of return if the price of Telecom stock goes up by 15% during the next year? The stock currently pays no dividends. (Negative value should be indicated by a minus sign. Round your answer to the nearest whole number.) b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. (Round your answer to 2 decimal places.)

Answer 2

Question

Chapter 3, Problem 9PS

Summary Introduction

(A)

Adequate information:

The current price in the market accounts for $50. The money available for investment is $5,000. The investor also borrowed money from the broker which amounts to $5,000 at a 8 % rate of interest.

To calculate:

The annual rate of return that must be earned by the investor if there is an increase of 10% in the telecom stock price

Introduction:

Rate of return refers to the ratio of loss or profit ascertained in the financial year with respect to the investment which is generally expressed in percentage of decrease or increase in the investment's value during the given period of time.

Summary Introduction

(B)

To calculate:

The fall in the price of the telecom stock that enables the investor to get margin call.

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

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Answer 3

Question

Chapter 3, Problem 9PS

Summary Introduction

(A)

Adequate information:

The current price in the market accounts for $50. The money available for investment is $5,000. The investor also borrowed money from the broker which amounts to $5,000 at a 8 % rate of interest.

To calculate:

The annual rate of return that must be earned by the investor if there is an increase of 10% in the telecom stock price

Introduction:

Rate of return refers to the ratio of loss or profit ascertained in the financial year with respect to the investment which is generally expressed in percentage of decrease or increase in the investment's value during the given period of time.

Summary Introduction

(B)

To calculate:

The fall in the price of the telecom stock that enables the investor to get margin call.

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

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Answer 4

Question

Chapter 3, Problem 9PS

Summary Introduction

(A)

Adequate information:

The current price in the market accounts for $50. The money available for investment is $5,000. The investor also borrowed money from the broker which amounts to $5,000 at a 8 % rate of interest.

To calculate:

The annual rate of return that must be earned by the investor if there is an increase of 10% in the telecom stock price

Introduction:

Rate of return refers to the ratio of loss or profit ascertained in the financial year with respect to the investment which is generally expressed in percentage of decrease or increase in the investment's value during the given period of time.

Summary Introduction

(B)

To calculate:

The fall in the price of the telecom stock that enables the investor to get margin call.

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Expert Solution & Answer

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Answer 5

Chapter 3, Problem 9PS

Summary Introduction

(A)

Adequate information:

The current price in the market accounts for $50. The money available for investment is $5,000. The investor also borrowed money from the broker which amounts to $5,000 at a 8 % rate of interest.

To calculate:

The annual rate of return that must be earned by the investor if there is an increase of 10% in the telecom stock price

Introduction:

Rate of return refers to the ratio of loss or profit ascertained in the financial year with respect to the investment which is generally expressed in percentage of decrease or increase in the investment's value during the given period of time.

Summary Introduction

(B)

To calculate:

The fall in the price of the telecom stock that enables the investor to get margin call.

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Answer 6

Chapter 3, Problem 9PS

Summary Introduction

(A)

Adequate information:

The current price in the market accounts for $50. The money available for investment is $5,000. The investor also borrowed money from the broker which amounts to $5,000 at a 8 % rate of interest.

To calculate:

The annual rate of return that must be earned by the investor if there is an increase of 10% in the telecom stock price

Introduction:

Rate of return refers to the ratio of loss or profit ascertained in the financial year with respect to the investment which is generally expressed in percentage of decrease or increase in the investment's value during the given period of time.

Answer 7

Chapter 3, Problem 9PS

Summary Introduction

(A)

Adequate information:

The current price in the market accounts for $50. The money available for investment is $5,000. The investor also borrowed money from the broker which amounts to $5,000 at a 8 % rate of interest.

To calculate:

The annual rate of return that must be earned by the investor if there is an increase of 10% in the telecom stock price

Introduction:

Rate of return refers to the ratio of loss or profit ascertained in the financial year with respect to the investment which is generally expressed in percentage of decrease or increase in the investment's value during the given period of time.

Answer 8

Summary Introduction

(B)

To calculate:

The fall in the price of the telecom stock that enables the investor to get margin call.

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Answer 9

Summary Introduction

(B)

To calculate:

The fall in the price of the telecom stock that enables the investor to get margin call.

Introduction:

Margin call comes into picture when the investor is required to deposit additional securities or money so that the margin in the investor's account stands equivalent to the minimum margin requirement.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 3 - Prob. 1PS Ch. 3 - Prob. 2PS Ch. 3 - Prob. 3PS Ch. 3 - Prob. 4PS Ch. 3 - Prob. 5PS Ch. 3 - Prob. 6PS Ch. 3 - Prob. 7PS Ch. 3 - Prob. 8PS Ch. 3 - Prob. 9PS Ch. 3 - Prob. 10PS

Solution Summary: The author calculates the annual rate of return that must be earned by the investor if there is an increase in the price of telecom stock by 10%.

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Chapter 3 Solutions