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BUYING ON MARGIN HOMEWORK SPRING 2017 Initial margin req. 0.50 Maintenance margin req. 0.30 Call rate 0.025 1. You buy 1,000 shares of Facebook on February 1, 2016 at $115 a share. What is the dollar amount of your initial margin? 2. You sell the FB shares on February 1, 2017 at $133 a share. What is your return? 3. Suppose you don’t sell. How low can FB’s price go before you receive a margin call? 4. Suppose FB drops to $80 a share. What is your actual margin? 5. What is the dollar amount of your margin call? 6. If you can’t meet the margin call, what is the maximum market value you can have given that your equity is fixed? 7. How many shares will your broker sell if you can’t meet the margin call? 8. What is the market value of your stock after the broker sells the shares? 9. What is your loan amount after the broker sells the shares?
Use the PV command to find the present value of each of the following future cash flows at a discount rate of 10% per year, compounded monthly:
Which of the following statements is correct? Portfolio diversification reduces the variability of the returns on the individual stocks held in a portfolio. Portfolio A has but one security, while Portfolio B has 100 securities.
A five-year project has an initial fixed asset investment of $275,000, an initial NWC investment of $23,000, and an annual OCF of −$22,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..
Post Card Depot, an large retailer of post cards, orders 3,288,390 post cards per year from its manufacturer. Post Card Depot plans on ordering post card 21 times over the next year. Post Card Depot receives the same number of post cards each time it..
What is the value of this periodic deposit? Give a detailed explanation on your calculations and what is the sum of their present values? Give a detailed explanation on your calculations.
Your company borrows $275,000 today to fund its growth initiatives. It must repay the bank in five annual payments of $76,300 at the end of each year. What annual interest rate is your firm paying?
A bank offers your firm a revolving credit arrangement for up to $54 million at an interest rate of 1.35 percent per quarter. What is your effective annual interest rate (an opportunity cost) on the revolving credit arrangement if your firm does not ..
Why can't you test the "minimum wages cause unemployment" theory by simply comparing unemployment rates across states with different minimum wages?
In a 5/1 “hybrid” adjustable-rate mortgage (ARM), the initial interest rate is fixed for 5 years, then is adjusted annually. (You usually pay “points” up front at closing in exchange for the “rate lock” for the first 5 years.) Use the Bankrate amorti..
you buy an asset for Rs.1,000,000. If it costs Rs.100,000 for shipping and installation,- how much is your investment outlay?
Suppose company A today enters a contract with company B for delivering 10,000 units of commodity c three months from today. Company A wants to hedge the risk of this position. Unfortunately, there is no futures market for commodity c. Find the hedgi..
The U.S. three-month interest rate (unannualized) is 1%. The Australian three-month interest rate (unannualized) is 2%. Assume interest rate parity exists. The expected inflation over this period is 4% in the U.S. and 3% in Australia. Determine the d..
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