Old Economy Traders opened an account to short sell 1,000 shares of Internet Dreams at $50 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 $50 to $55, and the stock has pad a dividend of $1 per share. What is the remaining margin in the account? $19,000 $15,000 $12,000 $18,000

Old Economy Traders opened an account to short sell 1,000 shares of Internet Dreams at $50 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 $50 to $55, and the stock has pad a dividend of $1 per share. What is the remaining margin in the account? $19,000 $15,000 $12,000 $18,000

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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You purchase 2,000 shares of Nice Kick Group (NKG) at $45 per share by giving your broker $60,000 to establish your margin account and borrowing the rest from your broker. A year has passed (t=1), and NKG paid out a dividend of $2 per share. The maintenance margin is 25%. If you paid an interest at a rate of 8% on the funds you borrowed from your broker, what is the NKG price at which would trigger a margin call? A. $60.94 B. $36.25 C. $71.07 D. $18.93
You have opened a new account to sell short 1,000 shares of Nicola stock at $100/shr. Initial margin ratio was 60% and maintenance margin ratio is 40%. [Ignore Stock loan fees.] Initial price $100/shr Current price $110/shr [i] What is the threshold level of the closing price, at which triggering a margin call is in effect? |Closing price $115*/shr [ii] Since share price is rising, you want to reduce the size of your short position now (at $110/shr) to avoid margin call after market close. If your target level of the maintenance margin ratio at close (your estimate: $115*/shr) is 45% (or above), how many shares do you need to buy back now (at $110/shr) at least?
You purchase 800 shares of CUW at $71.51 using your full margin which as an initial margin of 70% (or 0.70). The maintenance margin is 45% (or 0.45). At what price will you get your margin call?" (Neglect any interest on the cash loan)
Company A’s stock price is $50 today. It pays dividend of $1 after two months and $1.05after five months. The continuous compounded interest rate is 4%. Transaction costs are$0.20 per stock traded, and a $0.30 one-time fee for trading forward contracts, and no costfor borrowing or saving. If the six-month forward price is $52, demonstrate how to makearbitrage profits or explain why you can not.
A stock is selling for $83 per share. One-month European calls and puts on the stock with the strike price of $80 are selling for $6 and $3, respectively. Kevin creates a straddle by buying 100 calls and 100 puts. What is his net profit if the stock price is $85 one month later? O A loss of $600 O A gain of $400 O A loss of $400 O A loss of $900
You have a margin account and deposit Rs.90,000. Assuming the prevailing marginrequirement is 20%, commissions are ignored and D.G.K Cement stock is selling atRs.55 per share while Askari Cement stock is selling at Rs. 85 per share. You invest 40%of your investment in D.G.K cement while remaining is deposited in Askari cement.a. How many shares of each stock can you purchase using the maximum allowablemargin if you invest in both?b. What is your total and percentage profit (loss) if:1. the price of D.G.K Cement Rises to Rs.65 per share while Askari Cement stockrises to Rs. 97 per share?2. the price of D.G.K Cement reduces to Rs.42 per share while Askari Cementstock reduces to Rs. 76 per share?c. If you invest all money in D.G.K cement ONLY and the maintenance margin is 25%,to what price can D.G.K Cement stock fall before you will receive a margin call?d. If you invest all money in Askari cement ONLY and the maintenance margin is 25%,to what price can Askari cement stock fall before you…
Energy Cat Company stockholders expect to receive a year- end dividend of $5 per share and then immediately sell their shares for $60 dollars per share. If the required rate of return for the stock is 10%, what is the current value of the stock? $65.00 $60.00 $100.00 $59.09 $650.00
- Assume that six months ago you bought 2,500 shares of a stock at $70 per share using a margin. The margin rate was 40% and the interest rate on the margin loan was 8%. Assume no commissions. What is your gain or loss if the current stock price is $71 per share? A. -$1,700 B. $2,500 C. $6,700
25. Assume you purchased 2000 shares of XYZ common stock on margin at $30 per share from your broker. If the initial margin is 70%, what is the interest payment on the amount you borrowed from the broker if interest rate is 9%? $18000 $1620 $42000 $3780
1) Andy is bearish on USL and decides to sell short 20, 000 shares at the current market price of $120 per shar e. The initial margin is 50%. The margin account pays n o interest. Three days later, the price of USL has risen t o $130. a. What is the remaining margin in the account? b. If the maintenance margin is 30%, will Andy receive a margin call? c. Calculate the rate of return on the short position.
Seven months ago, you purchased 400 shares of stock on margin. The initial margin requirement on your account is 70 percent and the maintenance margin is 30 percent. The call money rate on the margin loan is 6.65 percent. The purchase price was $16 a share. Today, you sold these shares for $18.00 each. What is your annualized rate of return? O 64.64 percent O 56.87 percent O 33.35 percent O 42.77 percent O 29.39 percent O O
Finance You short sold 700 shares of a stock at $25 a share. The initial margin requirement is 75 percent and the maintenance margin is 35 percent. The price of the stock has changed to $30 a share today. How much money do you owe your broker today? Provide the answer in dollars, accurate to two decimal places.

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