How much should put into account first

Assignment Help Accounting Basics
Reference no: EM132588793

Mr. Hassan orders his broker to short-sell 1000 shares of IBM when the stock price is $50 per share. The initial margin requirement is 40%. Maintenance margin is 25%.

Question a. Mr. Hassan only wants enough in the account to satisfy the initial margin requirement. How much should he put into his account first?

Question b. At what price would Mr. Hassan receive a margin call?

Question c. What would his profit be if he cleared his positions when the stock price dropped to $40 and IBM had paid $5 dividends per share in the mean time? What would the return on his investment be?

Question d. Now, ignore information in part c) (i.e., assume that Mr. Hassan did not clear his position at $40 and that IBM paid no dividends). In addition to short-selling shares of IBM at $50 per share, Mr. Hassan also put a stop-buy order with his broker for 500 shares at $55 (Remember, he had shorted 1000 shares). What would Mr. Hassan's total loss be if the stock price gradually climbed from $50 to $60 and he then closed out all remaining positions? What would the return on his investment be? (Assume no dividends were paid)

Reference no: EM132588793

Questions Cloud

Calculate market capitalization of the hypothetical company : Calculate market capitalization of this hypothetical company. Enterprise Value 500,000. Perpetual Growth Rate 4%. Discount Rate
What is a casual argument in writing : What is a casual argument in writing?
Design an outline international marketing strategy : Design an outline international marketing strategy aimed at achieving the set objectives. In the report, creativity, realism and precision will be rewarded
How diction and imagery in the poem : Discuss how diction and imagery in the poem of the child who was shot dead by soldiers in nyanga by Ingrid Jonker reveals
How much should put into account first : What would his profit be if he cleared his positions when the stock price dropped to $40 and IBM had paid $5 dividends per share in the mean time?
What do you do if the unlv library : What do you do if the UNLV Library does not have access to a book or article that you need? Select all correct answers. (Multiple options)
What is the terminal value of the business : What is the terminal value of the business (using the growing perpetuity formula)? Debt-to-total value, Cost of Capital, Free Cash Flow
Record the transactions in general journal : 9th Sold equipment totalling RM12,000 to GB Football Ltd on 60 days credit. Record the above transactions in General Journal and prepare "T" ledger accounts
Information about a natural disaster : You want to find out more information about a natural disaster that occurred in the last six weeks.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Prepare a contribution margin income statement

Prepare a contribution margin income statement for a month in which the company sells 550 desks.

  Discuss the straight-line method of depreciation

Iggy Company uses the straight-line method of depreciation, Each project is expected to have zero salvage value at the end of the project

  Tire performance comparison report

A tire manufacturer has advertised that only 2%  of its tires have surface blemishes. Further, the manufac- turer argues that tires with such blemishes are perfectly safe, and with only the physical appearance  suffering very slightly. A consumer ..

  Using 2419000 as the total manufacturing costs compute the

using 2419000 as the total manufacturing costs compute the cost of goods manufactured using the following

  Compute the price-earnings ratio on common stock at december

Williams Corporation had 100,000 shares of common stock and 50,000 shares of noncumulative and nonconvertible preferred stock

  Overhead variance and cost of goods sold

Calculate the overhead variance.What is adjusted cost of goods sold

  What are the risk-free return and the expected return

Stock B has an expected return of 9% p.a. and a beta of 0.8. What are the risk-free return and the expected return on the market portfolio

  Explore some definitions of creative accounting

You have been requested by your employer Bartholomew Straight to investigate a number of ethical issues raised by creative accounting

  What does it mean to validate the scorecard in the context

We have noted in the text that it is important to validate the balanced scorecard. What does it mean to validate the scorecard in the context of the retail bank example above?

  Identify and describe major emerging technologies

Identify and describe 3 major emerging technologies that will have a pronounced effect on AIS over the next 10 years

  How are dividends and dividends payable reported

Prepare the entries, if any, on each of the three dividend dates and how are dividends and dividends payable reported in the financial statements prepared at December 31?

  What is the annual savings

The furnace will last for 20 years, at which point it will need to be replaced and will have no salvage value. The discount rate is 10%. What is annual savings

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd