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
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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Transcribed Image Text: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
c. If the maintenance margin requirement is 30%, will she receive a margin call?
O No
O Yes
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.)
Rate of return
10.04 %
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