Shakee Venture wants to purchase 1,000 shares of an Internet technologystock for $15 a share. She figures that she needs $15,000 plus $90 brokeragecommission to purchase the stock. She currently has $8,000 of liquidity inher money market account.a. What can Shakee borrow on margin in order to make the transaction?b. If the stock jumps to $50 per share within a week, how much will Shakeerealize in profit after paying her broker?c. If the stock dropped to $5 per share, rather than increasing to $50,and the broker put in the margin call, how much must Shakee pay thebroker?d. Based on beginning account balance of $8,000, what is Shakee’s loss?
Shakee Venture wants to purchase 1,000 shares of an Internet technologystock for $15 a share. She figures that she needs $15,000 plus $90 brokeragecommission to purchase the stock. She currently has $8,000 of liquidity inher money market account.a. What can Shakee borrow on margin in order to make the transaction?b. If the stock jumps to $50 per share within a week, how much will Shakeerealize in profit after paying her broker?c. If the stock dropped to $5 per share, rather than increasing to $50,and the broker put in the margin call, how much must Shakee pay thebroker?d. Based on beginning account balance of $8,000, what is Shakee’s 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
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Question
Shakee Venture wants to purchase 1,000 shares of an Internet technology
stock for $15 a share. She figures that she needs $15,000 plus $90 brokerage
commission to purchase the stock. She currently has $8,000 of liquidity in
her
a. What can Shakee borrow on margin in order to make the transaction?
b. If the stock jumps to $50 per share within a week, how much will Shakee
realize in profit after paying her broker?
c. If the stock dropped to $5 per share, rather than increasing to $50,
and the broker put in the margin call, how much must Shakee pay the
broker?
d. Based on beginning account balance of $8,000, what is Shakee’s loss?
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