Answered: Lauren short sells 100 shares of XYZ at…

Lauren short sells 100 shares of XYZ at $52 with a 50% initial margin. She then bays back the stock for $48. If her broker charges 2% of the borrowed amount, what is her percentage profit or loss?

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

See similar textbooks

Related questions

Q: Maren received 10 NQOs (each option gives her the right to purchase 10 shares of stock for $8 per…

A: The objective of the question is to calculate the gain Maren will recognize on the sale of the…

Q: On February 15, 2021, Harriett sold 500 shares of QRS Corporation short on the NYSE. Four days…

A: In futures trading, the holder of such a contract borrows the required share from an investor so…

Q: David spent $625 on 30 shares in a software company. Aftor six months, the valuos of his stocks are…

A: Price of stock = 625 Number of shares purchased = 30 Current Value of stock = 4762.80 Dividend Yield…

Q: ou decide to sell short 300 shares of Charlotte Horse Farms when it is selling at its yearly high of…

A: A margin account refers to a brokerage account where the investor can buy more stock by borrowing…

Q: Tommy purchases on margin 2000 shares of Sotoka stock for $ 65 per share with an initial margin…

A: Number of shares=2000 Price=$ 65 per share Initial margin requirement=50% Interest rate on margin…

Q: Rob has deposited K40,000 in his margin account and he wants to use the money to buy shares of the…

A: Brokers provide the margin to the client so that they can trade more and buy more shares and can…

Q: Sweet Sarah received 10 NQOs (each option gives her the right to purchase 20 shares of stock for $5…

A: Issue of shares is one of the important source being used for financing purpose. Stock options…

Q: Ed Delahanty purchased 500 shares of Niagara Corporation stock on margin at the beginning of the…

A: A stock is a financial instrument issued by a corporation to raise equity funds from the general…

Q: mium of $1.03. A put option with exercise price of $25 has a premium of $4.83. If David uses these…

A: Given information : Number of shares 100 Stock market price $ 33.67 Call option exercise…

Q: On January 2, 2019 Sona bought 10 lots (1,000 stocks) of COPA at $10,000,000. During that year, she…

A: To Find: Aritmatic return Geometric return Money weighted return

Q: Cindy buys a stock on January 1 for $25. It pays a total dividend of $1 during the first year, and…

A: Holding period return (HPR) is the total return received from holding an investment over a specific…

Q: Maren received 10 NQOS (each option gives her the right to purchase 14 shares of stock for $8 per…

A: It is the tax liability to be paid by the taxpayer for earning extra or additional earnings or…

Q: Beth bought stock in Apple for $800. While she owned it, she received 20% of the purchase price in…

A: The objective of the question is to find out the total profit as a percentage of the cost of the…

Q: Margo bought stock for $1,500 plus a $25 commission; 18 months later she sold all the stock for…

A: Form 1099-B will also indicate the date the stock was sold. The purchase and sell dates will…

Q: Marissa purchases Stock K when the ask price is 25. The bid-ask spread is 0.55, and the commission…

A: Bid-ask spread is the difference between the bid price and the ask price. Bid price is the price…

Q: 17) Quentin purchased 600 shares of stock on margin for $25.38 a share and sold the shares seven…

A: Step 1: Given that, Number of shares purchased = 600 Purchase price per share = $25.38 Selling price…

Q: Liz buys one share of Koca-Loka long for $10.40 and at the same time she buys a call on Koca-Loka…

A: Common stock is the security that offers an equity stake in the underlying company which allows the…

Q: Heidi owns 680 shares of Boyd Enterprises, which is priced at $65.44 per share. The company plans a…

A: Number of stocks prior to stock split, Npre = 680Proposed stock split: 6 for 5 that is a shareholder…

Q: Maren received 10 NQOs (each option gives her the right to purchase 15 shares of stock for $7 per…

A: Sale of share (10*7*$20) 1400 less basis (10*7*15) 1050 The gained realised 350 the tax…

Q: Abby Sane decided to buy corporate bonds instead of stock. She desired to have the fixed-interest…

A: Bonds are debt securities issued by governments, municipalities, or corporations as a means of…

Q: Barbara Simmions purchase 100 shares of Home Depot stock for $183.07 per share,using as little of…

A: Initial margin is the amount that is to be deposited by the buyer of stock at the time of purchase.…

Q: Mr. Chan's employer gave him a share option in March last year to buy 10,000 shares in X Ltd for $5…

A: Basic Information Sale Consideration = $200,000Cost of Acquisition = $100,000

Q: You decide to sell 100 shares of Topgun Enterprises Inc. short when it is selling a yearly high of…

Q: Jeff Krause purchased 1,000 shares of a speculative stock in January for $2.09 per share. Six months…

A: The holding period return of the investment is total return of investment made over a period of time…

Q: Chris purchases $3,000 worth of stock that costs $30 per share and borrows money so his debt to…

A: Given: Equity to debt ratio = 20%. This means for every $1 of equity, there's $0.20 of…

Q: Stella places a market order with her broker to buy 1000 shares of OneWorld Corp. The broker buys…

A: Number of shares = 1000 sharesPurchase price = $16.70 eachSelling price = $17.75 eachCommission =…

Q: Alexander buys AXP for $20 per share. Two years later, Alex sells AXP for $25 per share. In the…

A: Holding period return:Holding Period Return (HPR) is a measure used to assess the performance of an…

Q: In March of this year, Ermine felt the market had nowhere to go but down. Accordingly, she sold…

A: Generally the return is calculated by the following simple formula Return = (I + dP)/P0 Where I =…

Q: You decide to sell short 200 shares of Charlotte Horse Farms when it is selling at its yearly high…

A: Number of shares = 200Selling price $48Purchase price = $34Margin requirements = 50%Dividend =…

Q: Ryan Neal bought 1,400 shares of Ford at $15.92 per share. Assume a commission of 2% of the purchase…

A: Given, Number of shares bought = 1,400 Share price = $15.92 Commission = 2% of purchase price

Q: Ghaith purchased 200 shares of stock at $19 using his 70% margin account. his maintenance margin is…

A: PAYMENT MADE FOR PURCHASE = NUMBER OF STOCK * PRICE PER STOCK INITIAL DEPOSIT = PAYMENT MADE *…

Q: Tom Hank buys 150 shares of J.W stock for $85 per share and a three-month J.W call option with an…

A: Total Shares $ 150.00 Stock Price $ 85.00 exercise price $ 105.00 Premium $…

Q: You decide to sell short 100 shares of Charlotte Horse Farms when it is selling at its ye broker…

A: Rate of return is the amount of profit earned on investment made.Formula for rate of return on…

Q: Taylor bought x shares of a stock that sold for $31.50 per share. He paid a 2% commission on the…

A: STATEMENT OF SHAREHOLDERS EQUITYStatement of Shareholders Equity is also Known as Changes in…

Q: Sam bought through her broker 200 Apex Mining common stock at $61.50/share. The broker charged her…

A: Total shares purchased = 200 Each cost = $ 61.50 Total cost = 200 x $ 61.50 =…

Q: You purchase 280 shares of stock at $37.80 per share. Several months later you sell the shares at…

A: Total number of stocks purchased is 280 Purchase price per share is $37.80 Selling price per share…

Q: Cindy buys a stock on January 1 for $25. It pays a total dividend of $1 during the first year, and…

A: The holding period return (HPR) is the total return that an investor earns on an investment over a…

Q: Andrea was granted 50 ISOs. Each ISO allows her to purchase 100 shares of stock at $5 per share. She…

A: The income from the sale of employee stock for an employee is taxed as Short-Term Capital gain…

Q: Suppose that Sara sells short 1,000 shares of Korean Fried Cucumbers (KFC), now trading at $88.45…

A: When you shot than you believe that stock prices will fall and you will purchase at lower prices to…

Q: Kasandra has purchased 1,000 shares in ABC Ltd for $40 each. Her analysis suggests that the…

A: Holding period return is the total income generated divided by the price at the beginning of the…

Q: William bought one ABC $45 call contract (i.e., the exercise price is $45) for a premium of $5 per…

A: A call option is a financial derivative contract that gives the holder (buyer) the right, but not…

Q: Kai has $25,000 in his margin account. His broker pays 1% (continuously compounded) interest on cash…

A: In a margin account, the broker lends the investor money while using the account as collateral to…

Q: Jeff Sellers bought 200 shares of ATL stock at $29.38. Eight months later, he sold the stock at…

A: Bottom line is an idiom used for bottom most line of the income statement which shows the net income…

Question

Lauren short sells 100 shares of XYZ at $52 with a 50% initial margin. She then bays back the stock for $48. If her broker charges 2% of the borrowed amount, what is her percentage profit or loss?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

XYZ purchased a call option 3 months ago for $300 ($3 per share). It gives XYZ the right to buy 100 shares in Morley Tobacco for $20 per share. The call option expires today. What is the lowest price that XYZ should exercise at and what is that lowest price at which XYZ would realize a profit?
am. 105.
Shirly has $1000 and bought ABC holding's Berhad's share at $50 in February. One month later, she bought a put option at $6 with a strike price of $60. Calculate her profit when the share price is as follows I) $20 II) $80
Jessie B. purchases 450 shares of Smooth Sail Inc. for $50 per share at a time when the initial margin requirement is 60%. After two months, seeing that the price of Smooth Sail has fallen to $40 per share, Jessie wishes to buy an additional 200 shares. By this time, the initial margin requirement has gonedown to 50%. Will Jessie be able to do some pyramiding? What is the amount of margin he will be required to provide for his second transaction? Answer the question showing calculations.
Mary decides to short sell 80 shares of Company Y, currently trading at $45 per share. She incurs a transaction fee of $1 per share for selling and will incur the same fee when she buys back the shares. Calculate the stock price at which Mary would break even.
Setrakian Industries needs to raise $71.8 million to fund a new project. The company will sell bonds that have a coupon rate of 5.78 percent paid semiannually and that mature in 25 years. The bonds will be sold at an initial YTM of 6.46 percent and have a par value of $2,000. How many bonds must be sold to raise the necessary funds?
Jackie has posted $45,000 in her margin account. If intial margin requirements are 50%, and Turtle Industries is currently selling at $25 per share: How many shares of Turtle can Jackie purchase? What is Jackie’s profit if Turtle’s price rises to $40?
Suzy Q buys stock on 1/1/2011 for ____________ per share, paying annual dividends of $27. On 12/31/2011, she sells the stock for $350. Her annual rate of return is -5.75%.
1. You decide to short sell 100 shares of ABC Corporation when it is selling at its yearly high of P42.25. Your broker tells you that your margin requirement is 60% and that the commission on the sale is P20. While you are short, ABC Corporation pays a P.85 per share dividend. At the end of one year you buy your ABC Corporation shares (cover your short sale) at P44 and are charged a commission of P20 and a 5% interest rate. a. What is your peso return on the investment? (Show the solution and computation). a. P384.50 b. P432.88 c. -P432.88 d. -P384.50 b. What is your rate of return on the investment? a. 10.48% b. 12.87% c. -15.05% d. -13.98%
Amelia purchased 500 shares of Xienna stock at RM50 per share. She owns RM15,000 to invest and the minimum initial margin requirement is 50%. She held the stock for exactly four months and sold it without any brokerage cost at the end of that period. During the four-month holding period, the stock paid RM1.50 per share in cash dividends. Amelia was charged 8% annual interest on the margin loan. The minimum maintenance margin was 30%. While her husband, Afiq prefer to trade in stock futures. Afiq are bearish on Sunway stock and decide to short sells 300 shares. The initial margin is 50%, and the maintenance margin is 35%. A year later, Sunway price has risen from RM25 to RM37, and the stock has paid a dividend of RM2.00 per share. Required: a. Calculate the initial value of Amelia investment and borrowing amounts. b. What is the percentage margin when she first purchases the stock? c. Calculate the (1) dividend received and (2) interest paid on the margin loan during the four-month…
. Which of the followings is the most likely answer? Mr. Hamish paid a premium of $5 to buy a put on a stock that is currently valued at $60. The put strike price is $55. The maximum profit (including the premium) is ______ a) $0 b) $50 c) $55 d) $60
James sells short one share for 1000. He is asked for a margin requirement of 60% and the margin account earns a rate of 10% per annum. One year later he buys back the stock for 790 . Jack sells a stock short for 600. He is required to have a margin call of 50% and the margin account generates a the margin account of 10%. One year later he buys back his share for 450. It is known that both shares pay the same dividend and both generate the same rate of yield. Determine the amount of the dividend.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS