Suppose that you just purchased 250 shares of Beta Banana's stock for $70 per share. The initial margin requirement is 70.0%, whichmeans the amount borrowed is $5,250. The corresponding balance sheet is below:Liabilities and EquityStockTotal assetsMargin percentageAssetsRequired:a. Now suppose the price of the stock falls to $41 per share. What is your current margin percentage? (Round your answer to 2decimal places.)b. Construct the balance sheet to show the current situation.StockTotal assets$ 17,500.00$ 17,500.00c. If the maintenance margin is 50%, at what stock price would you get a margin call? (Round your answer to 2 decimal places.)PriceLoan from broker.EquityTotal liabilities and equityAssets%$ 5,250.00$ 12,250.00$ 17,500.00Liabilities and EquityLoan from brokerEquityTotal liabilities and equity

A margin call is made when an investor's equity, expressed as a percentage of the total market value…

Answered: Suppose that you just purchased 250…

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 want to purchase Stock A currently trading at $50 per share. You have $10,000 of your own to invest. You borrow an additional $10,000 from your broker and invest $20,000 in the stock. How far does the price of Stock A have to fall for you to get a margin call if the maintenance margin is 35%? Round your answer to two decimal places and enter the number without the dollar sign
You purchased 250 shares of common stock on margin for $ 28 per share . The initial margin is 70 % and the stock pays no dividend but has a trading cost of $ 0.1 per share . Your rate of return would be if you sell the stock at $ 36 per share . Hgnore interest on margin
You just bought $8,000 worth of a stock priced at $40 per share using 50% initial margin. The broker charges 6% on the margin loan and requires a 30% maintenance margin. At what price would you expect to get a margin call? To restore your margin to the initial margin level, how much would you need to deposit?
Suppose you sell short 200 shares of BP ADR currently selling at $40 per share. You give your broker $5000 to establish your margin account. You have no interest on the funds in your margin account. Assume that BP also has paid a year-end dividend of $0.5 per share, what will be your rate of return after one year if the BP price is $38. (please keep three decimal places, such as 0.031, NOT 3.1%)
Assume you buy 200 shares of stock at $70 per share on margin (40 percent). a. If the price risesto $95 per share, what is your percentage gain on the initial equity? b. What would the percentageloss on the initial equity be if the price had decreased to $40 ?
You are about to purchase OSTK, which is currently trading at $20 per share. You have $5,000 of your own to invest. You borrow an additional $5,000 from your broker and invest $10,000 in the stock. How far does the stock price have to fall for you to get a margin call if the maintenance margin requirement is 35%?
Question A, B & C please. A study guide question. Suppose you sell short Tesla which is currently trading at $300 per share. You put $30,000 as cash into your brokerage account with an initial margin of 50%. The maintenance margin is 35%. a)How many shares of Tesla can you sell short? b)How far can the stock price increase before you get a margin call? c)Assume Tesla pays a dividend of $10 per share after you sell it short. At what price, will you get a margin call?
Kendra Corporation's preferred shares are trading for $27 in the market and pay a $4.10 annual dividend. Assume that the market's required yield is 14 percent. a. What is the stock's value to you, the investor? b. Should you purchase the stock?
The stock of Pills Berry Company is currently selling at $60 per share. The firm pays a dividend of $2.25 per share. a. What is the annual dividend yield? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Dividend yield b. If the firm has a payout rate of 50 percent, what is the firm's P/E ratio? (Do not round intermediate calculations and round your answer to 2 decimal places.) P/E ratio times < Prev 5 of 10 Next SERIES
2. An investor buys $20,000 worth of a stock priced at $25 per share using 80% initial margin. The broker charges 5% on the margin loan and requires a 40% maintenance margin. The stock pays a $0.40 per share dividend in one year and then the stock is sold at $35 per share. What was the investor's rate of return? 56.46% 50.75% 48.28% 46.56%
You short sell 1,000 shares of RAJ stock at a price of $70. Your initial margin is 50%. If you cover your RAJ short position at a price of $65, how much is your return? A. 14.29% B. 12.31% C. 17.39% D. 15.65%

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