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What is the initial dollar value of equity

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Suppose that you buy 200 shares of Nvidia which is currently trading at $262 per share. Further suppose that your initial margin is 60% and your maintenance margin is 30%. The rate of interest on the margin loan is 8%.

Part A: What is the initial dollar value of your equity, dollar value of debt?

Part B: How does your net worth (value of your equity) in your brokerage account change if Nvidia's stock price immediately rises to $280?

Part C: How low can Nvidia's stock price fall before you get a margin call (assume this is an immediate price change)?

Part D: What is your return on equity if, after one year, you close out your position when Nvidia's stock price is trading at $290? Compare this to the ROA (appreciation of the stock).

Reference no: EM133119988

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