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Carol Travis had recently shorted 400 shares of Pfizer, Inc., at $25 because of new federal regulations on Medicare. She put up half the value of the purchase or $5,000 as margin. Pfi zer stock price $ 25 Shares purchased 400 Total purchase $10,000 Margin percentage (50%) 5,000 When the stock initially fell to $23.50 on a Friday, she was really excited. Based on the 400 shares she sold short, she had a $600 profi t. However, over the weekend she clicked on PFE (Pfi zer) on her Internet Web site, www.yahoo!finance and was surprised to read a story about Pfi zer’s new drug for osteoarthritis receiving FDA approval. Since she saw the news before the market opened on Monday morning, she called her investment advisor, Kyle Turner. She told Kyle she wanted to immediately close out her short sale position at the quoted price of $23.50 that she had seen when the the market closed on the previous Friday. Her investment advisor told her that would not be possible. Because of the positive news over the weekend, the stock was likely to open at a higher value. Carol became greatly concerned and anxiously awaited seeing the Monday morning opening price for Pfi zer. She went into a mild panic attack when she saw there was a delayed opening on the stock. Her investment advisor explained there was an overload of buy orders that could not be matched with sell orders by specialists in the stock. The stock fi nally opened at 10:30 EST at $26.53. a. Based on the new stock price, how much is Carol’s current margin position? b. What is her percentage loss on her initial margin of $5,000? c. If her investment advisor told her there was a 60 percent chance Pfi zer, Inc., would go from its current price to $28 and a 40 percent chance it would ultimately fall to $21, should Carol maintain or close out her short sale position?
The firm's total capital is $115 million and it finances with only debt and common equity. What is its debt-to-capital ratio?
Zachary L. and Cici K. Mao reside at 520 Chestnyt Street, Philadelphia, Pennsylvania 19160. They are both under 65 years old and have one dependent (their son, Oliver, age 4). They do not wish to take advantage of the presidential election campaign c..
Which of the following is NOT a Stage II decision when raising capital
What is the current share price for Company A stock?
How does preferred stock combine the worst features of bonds and common stock? 140 characters or less. Why would a preferred stockholder want to have a cumulative dividend feature and protective provisions? 140 characters or less. Why is preferred st..
If you require a return of 11 percent and use a light fixture 500 hours per year, what is the equivalent annual cost of the compact fluorescent lamps (CFLs)?
The Shome Corporation, a firm in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital, is considering a new project. The project involves the introduction of a new product. Working-capital requirements Ther..
Needham Pharmaceuticals has a profit margin of 6% and an equity multiplier of 2.5. Its sales are $110 million and it has total assets of $42 million. What is its Return on Equity (ROE)?
You own a two-bond portfolio. Each has a par value of $1,000. Bond A matures in five years, has a coupon rate of 8 percent, and has an annual yield to maturity of 9.20 percent. Both bonds pay interest semi-annually. What is the value of your portfoli..
Discussion Prompt - Financial decisions, return, risk, and the firm’s value are all related.
An examination of how an investment changes as one input at a time is changed is best described as:
A stock in the one-period binomial model such that S0=4 S1(H)=8 S1(T)=2 and r=0.25
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