Suppose that XTel currently is selling at $50 per share. You buy 800 shares using $30, remainder of the purchase price from your broker. The rate on the margin loan is 7%. Required: a. What is the percentage increase in the net worth of your brokerage account if the price of XTel immediately changes to (i) $56; (ii) $50; (ii) $44? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) (i) Percentage gain (ii) Percentage gain (iii) Percentage gain % % %
Suppose that XTel currently is selling at $50 per share. You buy 800 shares using $30, remainder of the purchase price from your broker. The rate on the margin loan is 7%. Required: a. What is the percentage increase in the net worth of your brokerage account if the price of XTel immediately changes to (i) $56; (ii) $50; (ii) $44? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) (i) Percentage gain (ii) Percentage gain (iii) Percentage gain % % %
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:d. What is the rate of return on your margined position (assuming again that you invest $30,000 of your own money) if XTel is selling
after one year at (i) $56; (ii) $50; (iii) $44? (Negative values should be indicated by a minus sign. Round your answers to 2 decimal
places.)
(i) Rate of return
(ii) Rate of return
(iii) Rate of return
%
%
%
e. Continue to assume that a year has passed. How low can XTel's price fall before you get a margin call? Note: Assume maintenance
margin of 25% (Round your answer to 2 decimal places.)
Price
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Transcribed Image Text:0
Suppose that XTel currently is selling at $50 per share. You buy 800 shares using $30,000 of your own money, borrowing the
remainder of the purchase price from your broker. The rate on the margin loan is 7%.
Required:
a. What is the percentage increase in the net worth of your brokerage account if the price of XTel immediately changes to (i) $56; (ii)
$50; (ii) $44? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus
sign. Round your answers to 2 decimal places.)
(i) Percentage gain
(ii) Percentage gain
(iii) Percentage gain
b. If the maintenance margin is 25%, how low can XTel's price fal before you get a margin call? (Round your answer to 2 decimal
places.)
Price
%
%
%
c. How would your answer to requirement b would change if you had financed the initial purchase with only $20,000 of your own
money? (Round your answer to 2 decimal places.)
Price
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