You decide to sell short 200 shares of Charlotte Horse Farms when it is selling at its yearly high of $48. Your broker tells you that your margin requirement is 50 percent and that the commission on the purchase is $360. While you are short the stock, Charlotte pays a $2.90 per share dividend. At the end of one year, you buy 200 shares of Charlotte at $34 to close out your position and are charged a commission of $350 and 13 percent interest on the money borrowed. What is your rate of return on the investment? Do not round intermediate calculations. Round your answer to two decimal places. %

You decide to sell short 200 shares of Charlotte Horse Farms when it is selling at its yearly high of $48. Your broker tells you that your margin requirement is 50 percent and that the commission on the purchase is $360. While you are short the stock, Charlotte pays a $2.90 per share dividend. At the end of one year, you buy 200 shares of Charlotte at $34 to close out your position and are charged a commission of $350 and 13 percent interest on the money borrowed. What is your rate of return on the investment? Do not round intermediate calculations. Round your answer to two decimal places. %

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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Similar questions

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XYZ purchased a call option 3 months ago for $300 ($3 per share). It gives XYZ the right to buy 100 shares in Morley Tobacco for $20 per share. The call option expires today. What is the lowest price that XYZ should exercise at and what is that lowest price at which XYZ would realize a profit?
A new high-growth business has issued stock options to new employees as part of their overall compensation. The options have a strike price of $.25 and vest evenly over 4 years but also automatically vest on a change in control (sale of the company). Jean works for this company and received 10,000 options when she was hired. After her third year of the company is acquired by a much larger firm at a price equal to $12.00 per share. Based on this scenario how much would Jean gain from the execution and sale of her shares upon the sale? In a different scenario, the company is not sold but Jean leaves the company after 24 months. How many shares does she have a right to own and how much would it cost her to exercise her options into shares?
Suzy Q buys stock on 1/1/2011 for ____________ per share, paying annual dividends of $27. On 12/31/2011, she sells the stock for $350. Her annual rate of return is -5.75%.
Emily is holding shares of stock A with market value of $100,000 that includes unrealized capital gains of $20,000. Tax rate on realized capital gains is 25%. Stock A is expected to earn annual return of 6.5% in the future. Stock B is expected to earn an 8.7% annual return in the future. What will be the after-tax value of switching to stock B now at the end of the holding period of three more years? Below 109,000 Between 109,000 and 110,500 Between 110,500 and 112,000 Between 112,000 and 113,500 Between 113,500 and 115,000 Above 115,000
You purchase one Virgin Galactic March 120 put contract (equalling 1000 shares) for a put premium of $10. You hold the option until the expiration date, when Virgin Galactic stock sells for $123 per share. a) How much is the realized profit/loss on the transaction? b) What is the maximum profit that you can realize on this position? c) What is biggest loss that you can suffer on this position? d) What is the realized profit/loss of your counterparty (the buyer of this call option)? Please briefly explain the calculations as well, thanks!
Amelia purchased 500 shares of Xienna stock at RM50 per share. She owns RM15,000 to invest and the minimum initial margin requirement is 50%. She held the stock for exactly four months and sold it without any brokerage cost at the end of that period. During the four-month holding period, the stock paid RM1.50 per share in cash dividends. Amelia was charged 8% annual interest on the margin loan. The minimum maintenance margin was 30%. While her husband, Afiq prefer to trade in stock futures. Afiq are bearish on Sunway stock and decide to short sells 300 shares. The initial margin is 50%, and the maintenance margin is 35%. A year later, Sunway price has risen from RM25 to RM37, and the stock has paid a dividend of RM2.00 per share. Required: a. Calculate the initial value of Amelia investment and borrowing amounts. b. What is the percentage margin when she first purchases the stock? c. Calculate the (1) dividend received and (2) interest paid on the margin loan during the four-month…
Bill Bloggs has 10,000 shares in Carlton Ltd. The current price in Carlton Ltd is $9.50. Bill Bloggs would like to sell the shares immediately, but certain restrictions have been imposed upon him that mean he will have to wait one month. Concerned about fluctuating prices, he decides to enter into a futures contract on Carlton Ltd shares in which he takes a sell position. The price of Carlton Ltd future is $9.70, and his futures contract is for 10,000 units. One month later the price of Carlton Ltd shares has risen to $12.10 and a Carlton Ltd future cost $12.29. Bill Bloggs closes out his futures contract and sells his shares. How much does Bill Bloggs receive from the above transaction? Please write your answer in the grey text box provided below. 5
Sam purchased Walsh stocks at $200 per share three month ago and did not receive anydividends so far. If his target is to earn a 20% APR on the investments, at what stock price couldhe sell the stock now? (Hint: what is the HPR for 3 months?)

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