At what price would you receive margin call

Assignment Help Financial Management

Reference no: EM131825733

Assume you borrow $25,000 to buy a stock selling for $50 a share. Your account starts with an initial margin requirement of 50% and has a maintenance margin of 25%.

A. At what price would you receive a margin call?

B. If the price were to rise to $56 a share after one year and you are charged an interest rate of 6%, what would be your rate of return?

C. Compared to an investor who purchased the same number of shares but used their own cash (so they did not borrow to buy the stock), would you earn a higher or lower return? Explain. What about if the stock price had fallen?

Reference no: EM131825733

Questions Cloud

Explain the current issues in accounting and auditing : The objective of this project is for you to research a current issue in accounting, auditing, or tax that interests you in depth.

Review the processes and outlines of other students : Review the processes and outlines of other students, providing objective feedback that will help strengthen the effectiveness of their efforts.

Write a paper that describes how teams are developed : Write a paper that describes how teams are developed. Explain the health care leader's role in building, energizing, and leading teams.

Calculate the firm current assets and working capital : Calculate the firm's current assets and working capital at April 30.

At what price would you receive margin call : At what price would you receive a margin call?

The central issue in the study of leverage : The central issue in the study of leverage is. The cost of capital is used primarily in.

Identify a quality measure to determine cause of the issue : Identify a quality measure to determine cause of the issue. Explain the rationale for using the quality measure identified in (b) above.

If both funds portfolios have an average return : If both funds’ portfolios have an average return of 10%, which is the better investment after 10 years given an initial investment of $1,000?

Calculate platinum and steel products return on equity : Calculate Platinum & Steel Products's return on equity (ROE) for the year.

User Account

All Pages