What is the margin in dollars

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Reference no: EM131963571

Suppose that an investor establishes a fully margined long position of 500 shares of firm A at a price of $32 per share. The initial margin is 50 percent and interest on the margin loan is 10 percent annual. Brokerage costs are $10 per transaction.

a. What is the margin in dollars? b. Show the “T” account immediately after the investor takes the position. Show the calculations for the numbers in the “T” account. (calcs)

b. If the share price rises to $40 after 4 months, show the “T” account at that point in time.

c. What is the actual margin at a share price of $40?

d. If the maintenance margin requirement is 30 percent, at what price would the investor receive a margin call?

e. After 6 months, the investor sells the shares for $41. During the holding period, the investor received a dividend of $.80 per share. Considering the round-trip brokerage costs and interest on the margin loan, what was the investor’s return for the 6-month holding period?

Please show all work for each part for a positive review.

Reference no: EM131963571

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