General finance You purchased 300 shares of commonstock on margin for $60 per share. Theinitial margin is 60% and the stock pays nodividend. What would your rate of returnbe if you sell the stock at $45 per share?Ignore interest on margin.

Investment Rate of ReturnInvestment refers to putting your money in an asset to generate income (eg.…

Answered: You purchased 300 shares of common…

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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If you originally bought a share of stock for $27, and in one year it paid a dividend of $4 and now costs $33. You sell the stock today for $33, what is your percentage return? (answer in percent, but without the percent sign, e.g. "8.25" is 8.25%)
Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account.a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Xtel pays no dividends.b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call?c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.
You expect a share of EconNews.Com to sell for $65 a year from now. If you are willing to pay $65.74 for one share of the stock today, and you assume the share is riskless but require a return of 8 percent, what dividend payment must you expect to receive from the stock?
Suppose the call money rate is 4.5 percent, and you pay a spread of 2.5 percent over that. You buy 1,200 shares of stock at $48 per share. You put up $37,440. One year later, the stock is selling for $60 per share and you close out your position. What is your return assuming a dividend of $0.24 per share is paid? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Rate of return %
You buy a share of stock for $100 and it pays no dividend. A year later the market price is $105. What is the rate of return?
You want to purchase some share of JJ Farms stock but need a rate of return of 17.5 percent to compensate for the perceived risk. What is the maximum you are willing to pay per share for this stock if the company pays a constant $2.43 annual dividend per share?
Suppose that you sell short 1000 shares of Xtel, currently selling for $50 per share, and give your broker $40,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $55; (ii) $50; (iii) $46? Assume that Xtel pays no dividends. (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.) b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? (Round your answer to 2 decimal places.) c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $2 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)
2. Suppose you buy shares of a stock worth OMR20000 and the initial margin is 50% and the maintenance margin is 30%. A. How much money must you pay the broker for the shares? How much have you borrowed from the broker? B. Suppose the price of the stock falls so that the shares are only worth OMR10000. What would be your nev account equity? C. How much money you need to give the broker to meet the maintenance margin?
Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account. a. if you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: $22, $20, and $18? Assume that Xtel's pays no dividends. b. If the maintenance margin is 25%, how high can Xtel's price rise before you get a margin call? c. Redo parts a and b but now assume that Xtel has paid a year end dividend of $1 per share. The pruces in part a should be interpreted as ex-dividend, that is prices after the dividend has been paid.
You purchase a stock for $50 per share today. It will pay a dividend of $1.75 next month. If you can sell it for $65 right after the dividend is paid, what is the dividend yield? What is the capital gain? What is the rate of return?
An investor buys one share of a stock at $85 at t= 0. He buys an additional share for $90 at t= 1. The stock pays a dividend of $5 per share at t = 1 and t = 2. The investor sells both the shares at t = 2 for $100 each. Which of the following is most likely the time weighted rate of return? A. 11.34%. B. 14.18%. C. 14.94%.
.Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account. a.If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Xtel pays no dividends. b.If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? c.Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.13.

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You purchased 300 shares of common stock on margin for $60 per share. The initial margin is 60% and the stock pays no dividend. What would your rate of return be if you sell the stock at $45 per share? Ignore interest on margin.