What is your percentage return on equity for this trade

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A. The current market price for XYZ is $162 per share. Initial margin is 50%, maintenance margin is 35% and margin interest is 1.50% per year.

A.1) You believe the stock price will increase over the next year and wish to trade exactly one round lot. What trade should you make? How much margin would you have to post to your account? At what price would you receive a margin call?

A.2) Suppose you are correct and the stock rises to $175 per share at the end of the year. What is your percentage return on equity for this trade?

B. The current market price for ABC is $90 per share. Initial margin is 50%, maintenance margin is 35% and there is no margin interest.

B.1) You believe the stock price will decrease over the next year and wish to trade exactly one round lot. What trade should you make? How much margin would you have to post to your account? At what price would you receive a margin call?

B.2) Suppose you are correct and the stock falls to $85 per share at the end of the year. What is your percentage return on equity for this trade?

Reference no: EM131825267

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