Dee Trader opens a brokerage account and purchased 300 shares of Internet Dreams at $40 per share. She borrows $4000 from her broker to help pay for the purchase. The interest rate of the loan is 8%.
a. What is the margin in Dee's account when she purchases the stock?
b. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 30%, will she receive a margin call?
c. What is the rate of return on her investment?
Dee Trader opens a brokerage account and purchased 300 shares of Internet Dreams at $40 per share. She borrows $4000 from her broker to help pay for the purchase. The interest rate of the loan is 8%.
a. What is the margin in Dee's account when she purchases the stock?
b. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 30%, will she receive a margin call?
c. What is the rate of return on her investment?
Related questions
Dée Trader opens a brokerage account and purchases 400 shares of Internet Dreams at $30 per share. She borrows $5,000 from her broker to help pay for the purchase. The interest rate on the loan is 5%.
a. What is the margin in Déeâs account when she first purchases the stock?
Margin [ ] $
b-1. If the share price falls to $19 per share by the end of the year, what is the remaining margin in her account? (Round your answer to 2 decimal places.)
Remaining margin [ ] %
b-2. If the maintenance margin requirement is 30%, will she receive a margin call?
| Yes | |
| No |
c. What is the rate of return on her investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Rate of return [ ] %
25.
Old Economy Traders opened an account to short-sell 1,000 shares of Internet Dreams at $45 per share. The initial margin requirement was 50%. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $45 to $49.50, and the stock has paid a dividend of $5.40 per share.
a. What is the remaining margin in the account?
Remaining margin [ ] $
b-1. What is the margin on the short position? (Round your answer to 2 decimal places.)
Short margin [ ] %
b-2. If the maintenance margin requirement is 30%, will Old Economy receive a margin call?
| Yes | |
| No |
c. What is the rate of return on the investment? (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Rate of return [ ] %
