Dée Trader opens a brokerage account and purchases 400 shares of Internet Dreams at $22 per share. She borrows $3,600 from her broker to help pay for the purchase. The interest rate on the loan is 8%. Required: a. What is the margin in Dée's account when she first purchases the stock? Margin b. If the share price falls to $12 per share by the end of the year, what is the remaining margin in her account? Remaining margin

Dée Trader opens a brokerage account and purchases 400 shares of Internet Dreams at $22 per share. She borrows $3,600 from her broker to help pay for the purchase. The interest rate on the loan is 8%. Required: a. What is the margin in Dée's account when she first purchases the stock? Margin b. If the share price falls to $12 per share by the end of the year, what is the remaining margin in her account? Remaining margin

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter14: Property Transactions: Capital Gains And Losses, § 1231, And Recapture Provisions

Section: Chapter Questions

Problem 43P

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Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $58 per share. She borrows $2,200 from her broker to help pay for the purchase. The interest rate on the loan is 12%. Required:a. What is the margin in Dée’s account when she first purchases the stock? b. If the share price falls to $48 per share by the end of the year, what is the remaining margin in her account? c. If the maintenance margin requirement is 30%, will she receive a margin call?multiple choice Yes No d. 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.)
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Suppose Alex has an opportunity to buy shares of Sunnyland Snacks Company. The shares are expected to pay a dividend of $2.50 per share in one year and to sell for $92.00 per share at that time. a. Suppose the current interest rate on safe assets is 5% and Alex believes that investing in Sunnyland is not risky. How much would Alex be willing to pay today for each share of the company? b. Suppose the current interest rate on safe assets is 5%. Alex is willing to pay at most $85.90 for each share of Sunnyland today. Calculate Alex’s risk premium.
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