Percentage increase in net worth of your brokerage account

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Reference no: EM131021597

Suppose that Intel currently is selling at $64 per share. You buy 500 shares using $20,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 7%. a. What is the percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to: (i) $69.44; (ii) $64; (iii) $58.56? What is the relationship between your percentage return and the percentage change in the price of Intel? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "%" sign in your response.) (i) Percentage gain % (ii) Percentage gain % (iii) Percentage gain % b. If the maintenance margin is 25%, how low can Intel’s price fall before you get a margin call? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Margin call will be made at price $ or lower c. How would your answer to (b) change if you had financed the initial purchase with only $16,000 of your own money? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Margin call will be made at price $ or lower d. What is the rate of return on your margined position (assuming again that you invest $20,000 of your own money) if Intel is selling after 1 year at: (i) $69.44; (ii) $64; (iii) $58.56? What is the relationship between your percentage return and the percentage change in the price of Intel? Assume that Intel pays no dividends. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the "%" sign in your response.) (i) Rate of return % (ii) Rate of return % (iii) Rate of return % e. Continue to assume that a year has passed. How low can Intel’s price fall before you get a margin call? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Margin call will be made at price $ or lower

Reference no: EM131021597

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