Calculate the investors return for the holding period

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Reference no: EM132012813

Suppose that an investor buys 300 shares on margin at $40 per share. The initial margin is 50% and the maintenance margin is 30%. After one year, the investor sells the shares for $38 and closes the long position.

During the holding period, the shares paid a dividend of $1.30 per share. Interest on the margin loan is 7% annual. Show the calculations for the numbers you enter in the "T" accounts.

a. Show the investor's beginning "T" account. At what price would this investor receive a margin call? (calcs here)

b. Show the investor's "T" account at the share price of $38. What is the actual margin at this price? (calcs. here)

c. Calculate the investor's return for the holding period.

Reference no: EM132012813

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