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An investor is trading on a margin account that has an initial margin requirement of 45% and maintenance margin requirement of 35%. She bought 1,000 shares at $12 each. The interest rate on the margin account is 7% and there is a flat $10 commission on every trade (buy or sell).
a) If the price moves to $14, calculate the new margin (ignore interest).
b) If the price drops to $7, will the investor get a margin call? How much she needs to deposit (ignore interest)?
c) After 6-months she sold all those shares at $17 each. Calculate her annualized levered return (include interest and commissions).
Behavioural Finance - Individual Assignment - Present and discuss two examples of anchoring in financial markets
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