P-1 An investor buys 100 shares of Altria at $82 per share on margin. The initial margin requirement is 50 percent, and the maintenance margin is 30 percent. a. The price of Altria drops to $61 per share. What is the actual margin now? b. The price of Altria declines further to $59.50. Show why a margin cal is generated, or is not warranted. c. The price declines yet again to $55.25. Show by calculations why a margin call is generated.

P-1 An investor buys 100 shares of Altria at $82 per share on margin. The initial margin requirement is 50 percent, and the maintenance margin is 30 percent. a. The price of Altria drops to $61 per share. What is the actual margin now? b. The price of Altria declines further to $59.50. Show why a margin cal is generated, or is not warranted. c. The price declines yet again to $55.25. Show by calculations why a margin call is generated.

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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pm.7
You buy 300 shares of Suncor Energy for $25 per share and deposit initial margin of 50%. The next day, Suncor Energy 's price drops to $20 per share. What is your actual margin the next day? Multiple Choice 25% 40% 50% 62.5% 60%
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How do I solve this?
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Ef 104.
You buy 100 shares of Demolishing Dividend Corporation at the beginning of year 1 for R80. Demolishing Dividend Corporation pays no dividends. The stock price at the end of year 1 is R100, R120 at the end of year 2 and R150 at the end of year 3. The stock price declines to R100 at the end of year 4 and you sell your 100 shares. For the fours years, your geometric average return is ?
If you place a stop-loss order to sell 500 shares of Nedbank at R130 when the current price is R135, how much will you receive for each share if the price drops to R127? a. Close to R127 ○ b. Close to R130 ○ c. Close to R135 d. Won't sell because the price is too low
It is believed that Blue Co.s stock price is going to decline from its current level of P88.50 anytime during the next 3 months. A 3-month put option can be bought for P625 which gives the buyer the right to sell 50 shares at a price of P90 per share. What would be the net profit if you bought a 50- share contract for P625 and Blue Co.'s stock price dropped to P75? *
- 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

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