Problem 3-04You decide to sell short 300 shares of CharlotteHorse Farms when it is selling at its yearly high of$49. Your broker tells you that your marginrequirement is 65 percent and that the commissionon the purchase is $525. While you are short thestock, Charlotte pays a $2.35 per share dividend. Atthe end of one year, you buy 300 shares ofCharlotte at $34 to close out your position and arecharged a commission of $520 and 9 percentinterest on the money borrowed. What is your rateof return on the investment? Do not roundintermediate calculations. Round your answer totwo decimal places._%

The rate of return on stocks, also known as stock return, is a measure of the profitability or…

Answered: You decide to sell short 300 shares of…

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

am. 105.
On January 1, year 1, Tyra started working for Hatch Corporation. New employees must choose immediately between receiving 7 NQOs (each NQO provides the right to purchase for $5 per share 10 shares of Hatch stock) or 50 restricted shares. Hatch's stock price is $5 on Tyra's start date. Either form of equity-based compensation will vest in two years. Tyra believes that the stock will be worth $15 per share in two years and $25 in four years when she will sell the stock. Tyra's marginal tax rate is 32 percent and her long-term capital gains rate is 15 percent. Assuming that Tyra's price predictions are correct, answer the following questions (ignore present value, and use nominal dollars): (List cash outflows as negative amounts. Leave no answers blank. Enter zero if applicable.) Problem 12-37 Part c (Static) c. What are the cash-flow effects to Tyra in the year she receives the restricted stock, in the year the stock vests, and in the year she sells the stock if she makes an 83(b)…
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
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…
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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