(a) Adequate information: Own investment is $5,000. The amount to be borrowed is $5,000. The interest rate is 8% p.a. The current market price of share is$50. To compute: The rate of return for the investor if the price of telecom stock goes up by 10% during the next year. Introduction: The cost of a stock is the present estimation of all future money streams from the stock. The required rate of return is that rate which a financial specialist anticipates from a stock. This rate is utilised to discount the normal future money streams from the stock. In an event, when a stock's profit develops at a specific rate for uncertain period, the stock is known as consistent growing stock.

Question

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Answer 1

Question

Chapter 3, Problem 18PS

Summary Introduction

(a)

Adequate information:

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

The current market price of share is$50.

To compute:

The rate of return for the investor if the price of telecom stock goes up by 10% during the next year.

Introduction:

The cost of a stock is the present estimation of all future money streams from the stock. The required rate of return is that rate which a financial specialist anticipates from a stock. This rate is utilised to discount the normal future money streams from the stock. In an event, when a stock's profit develops at a specific rate for uncertain period, the stock is known as consistent growing stock.

Summary Introduction

(b)

Adequate information:

The maintenance margin is 30%

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

Current market price of share is $50.

To compute:

The price of the stock at which an investor receives margin call, if the maintenance margin is 30%.

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Answer 2

Question

Chapter 3, Problem 18PS

Summary Introduction

(a)

Adequate information:

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

The current market price of share is$50.

To compute:

The rate of return for the investor if the price of telecom stock goes up by 10% during the next year.

Introduction:

The cost of a stock is the present estimation of all future money streams from the stock. The required rate of return is that rate which a financial specialist anticipates from a stock. This rate is utilised to discount the normal future money streams from the stock. In an event, when a stock's profit develops at a specific rate for uncertain period, the stock is known as consistent growing stock.

Summary Introduction

(b)

Adequate information:

The maintenance margin is 30%

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

Current market price of share is $50.

To compute:

The price of the stock at which an investor receives margin call, if the maintenance margin is 30%.

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Answer 3

Question

Chapter 3, Problem 18PS

Summary Introduction

(a)

Adequate information:

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

The current market price of share is$50.

To compute:

The rate of return for the investor if the price of telecom stock goes up by 10% during the next year.

Introduction:

The cost of a stock is the present estimation of all future money streams from the stock. The required rate of return is that rate which a financial specialist anticipates from a stock. This rate is utilised to discount the normal future money streams from the stock. In an event, when a stock's profit develops at a specific rate for uncertain period, the stock is known as consistent growing stock.

Summary Introduction

(b)

Adequate information:

The maintenance margin is 30%

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

Current market price of share is $50.

To compute:

The price of the stock at which an investor receives margin call, if the maintenance margin is 30%.

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Answer 4

Question

Chapter 3, Problem 18PS

Summary Introduction

(a)

Adequate information:

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

The current market price of share is$50.

To compute:

The rate of return for the investor if the price of telecom stock goes up by 10% during the next year.

Introduction:

The cost of a stock is the present estimation of all future money streams from the stock. The required rate of return is that rate which a financial specialist anticipates from a stock. This rate is utilised to discount the normal future money streams from the stock. In an event, when a stock's profit develops at a specific rate for uncertain period, the stock is known as consistent growing stock.

Summary Introduction

(b)

Adequate information:

The maintenance margin is 30%

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

Current market price of share is $50.

To compute:

The price of the stock at which an investor receives margin call, if the maintenance margin is 30%.

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Answer 5

Chapter 3, Problem 18PS

Summary Introduction

(a)

Adequate information:

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

The current market price of share is$50.

To compute:

The rate of return for the investor if the price of telecom stock goes up by 10% during the next year.

Introduction:

The cost of a stock is the present estimation of all future money streams from the stock. The required rate of return is that rate which a financial specialist anticipates from a stock. This rate is utilised to discount the normal future money streams from the stock. In an event, when a stock's profit develops at a specific rate for uncertain period, the stock is known as consistent growing stock.

Summary Introduction

(b)

Adequate information:

The maintenance margin is 30%

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

Current market price of share is $50.

To compute:

The price of the stock at which an investor receives margin call, if the maintenance margin is 30%.

Answer 6

Chapter 3, Problem 18PS

Summary Introduction

(a)

Adequate information:

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

The current market price of share is$50.

To compute:

The rate of return for the investor if the price of telecom stock goes up by 10% during the next year.

Introduction:

The cost of a stock is the present estimation of all future money streams from the stock. The required rate of return is that rate which a financial specialist anticipates from a stock. This rate is utilised to discount the normal future money streams from the stock. In an event, when a stock's profit develops at a specific rate for uncertain period, the stock is known as consistent growing stock.

Answer 7

Chapter 3, Problem 18PS

Summary Introduction

(a)

Adequate information:

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

The current market price of share is$50.

To compute:

The rate of return for the investor if the price of telecom stock goes up by 10% during the next year.

Introduction:

The cost of a stock is the present estimation of all future money streams from the stock. The required rate of return is that rate which a financial specialist anticipates from a stock. This rate is utilised to discount the normal future money streams from the stock. In an event, when a stock's profit develops at a specific rate for uncertain period, the stock is known as consistent growing stock.

Answer 8

Summary Introduction

(b)

Adequate information:

The maintenance margin is 30%

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

Current market price of share is $50.

To compute:

The price of the stock at which an investor receives margin call, if the maintenance margin is 30%.

Answer 9

Summary Introduction

(b)

Adequate information:

The maintenance margin is 30%

Own investment is $5,000.

The amount to be borrowed is $5,000.

The interest rate is 8% p.a.

Current market price of share is $50.

To compute:

The price of the stock at which an investor receives margin call, if the maintenance margin is 30%.

Answer 10

Expert Solution & Answer

Answer 11

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Answer 12

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Answer 13

Ch. 3.8 - Suppose you by 100 shares of stock initially...Ch. 3.8 - Repeat Question 1 assuming your initial margin was...Ch. 3.9 - Suppose you sell short 100 shares of stock...Ch. 3.9 - Repeat Question t (b) but now assume that the...Ch. 3 - Prob. 1PS Ch. 3 - What are some different components of the...Ch. 3 - Prob. 3PS Ch. 3 - Prob. 4PS Ch. 3 - In what cirecumstances are private placements more...Ch. 3 - Prob. 6PS

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(b) Adequate information: The maintenance margin is 30% Own investment is $5,000. The amount to be borrowed is $5,000. The interest rate is 8% p.a. Current market price of share is $50. To compute: The price of the stock at which an investor receives margin call, if the maintenance margin is 30%.

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Chapter 3 Solutions