Finance/Investment Homework

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Business Finance

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Textbook#1.docx 

Assignment due Monday night by 8:30pm EST-US

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Problem#1 You decide to buy 1,500 shares of stock at a price of $90 and an initial margin of 65 percent. What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 40 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Do not include a minus sign. Omit the "%" sign in your response.) Stock price decline answer- % You believe the stock in Freeze Frame Co. is going to fall, so you short 700 shares at a price of $80. The initial margin is 60 percent. 1. Construct the equity balance sheet for the original trade. (Input all amounts as positive values. Omit the "$" sign in your response.) Assets Proceeds from sale Liabilities and account equity Short position $ Initial margin deposit Total $ Account equity Total $ $ 2- Construct an equity balance sheet for a stock price of $71 per share. (Input all amounts as positive a. values. Omit the "$" sign in your response.) Assets Proceeds from sale Liabilities and account equity Short position $ Initial margin deposit Total $ Account equity Total $ $ 2- What is your margin? (Do not round intermediate calculations. Enter your answer as a percent b. rounded to 2 decimal places. Omit the "%" sign in your response.) Margin % 2- What is your effective annual return if you cover your short position at this price in 4 months? (Do not c. round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.Omit the "%" sign in your response.) Effective annual return % 3- Construct an equity balance sheet for a stock price of $85 per share.(Input all amounts as positive a. values. Omit the "$" sign in your response.) Assets Proceeds from sale Liabilities and account equity Short position $ Initial margin deposit Total $ Account equity Total $ $ 3- What is your margin? (Do not round intermediate calculations. Enter your answer as a percent b. rounded to 2 decimal places. Omit the "%" sign in your response.) Margin % 3- What is your effective annual return if you cover your short position at this price in 4 c. months?(Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) Effective annual return %
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Really useful study material!

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