Question

(a)
i) Rate of Return = (125-135)*200/20000 = -10% or (10%)
ii) Rate of return = (125-125)*200/20000 = 0%
iii) Rate of return = (125-120)*200/20000 = 5%

(b)
Margin Call
0.25 = (45,000 – 200 * P)/(200 * P)
P = \$180

(c)

i) Rate of Return = ((125-135)*200-200)/20000 = -11% or (11%)
ii) Rate of return = ((125-125)*200-200)/20000 = -1% or (1%)
iii) Rate of return = ((125-120)*200-200)/20000 = 4%

(d)
Margin Call
0.25 = ((45,000-200) – 200 * P)/(200 * P)
P = \$179.20

#### Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
• ### Suppose that you sell short 1000 shares of Xtel, currently selling for \$60 per share, and...

Suppose that you sell short 1000 shares of Xtel, currently selling for \$60 per share, and give your broker \$45,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) \$66; (ii) \$60; (iii) \$54? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required. Negative values...

• ### Suppose that you sell short 400 shares of Xtel, currently selling for \$50 per share, and...

Suppose that you sell short 400 shares of Xtel, currently selling for \$50 per share, and give your broker \$8,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) \$54; (ii) \$50; (iii) \$44? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "O" wherever required. Negative values...

• ### Suppose that Xtel currently is selling at \$60 per share. You buy 400 shares using \$15,000...

Suppose that Xtel currently is selling at \$60 per share. You buy 400 shares using \$15,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 8% 6. What is the percentage increase in the net worth of your brokerage account of the price of Xtel immediately changes to \$63.90 (11) \$60 (1) \$56 10? What is the relationship between your percentage return and the percentage change in the...

• ### poed c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of \$2 per share. The pr...

poed c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of \$2 per share. The prices in part (a) should be interpreted as ex dividend, that is, prices after the dividend has been paid. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) Prim Rate of return 1. Rate of retum Rate of retum Margin cal will be made at price or higher Problem 3-12...

• ### Suppose that Xtel currently is selling at \$79 per share. You buy 500 shares using \$30,000...

Suppose that Xtel currently is selling at \$79 per share. You buy 500 shares using \$30,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 5%. a. What is the percentage increase in the net worth of your brokerage account if the price of Xtel immediately changes to: (i) \$87.20; (ii) \$79; (iii) \$70.80? What is the relationship between your percentage return and the percentage change in the...

• ### Need help with Part-C-Redo parts a & b but now assume that Xtel also paid a...

Need help with Part-C-Redo parts a & b but now assume that Xtel also paid a year end dividend of \$1.50 per share. The prices in part a should be interpreted as ex-dividend, that is, prices after the dividend has been paid? Answers to the other parts below Suppose that you sell short \$1,000 shares of Xtel, currently selling at \$30 per share and give your broker \$20,000 to establish your margin account If you earn no interest on the...

• ### Suppose that Xtel currently is selling at \$44 per share. You buy 500 shares using \$18,000...

Suppose that Xtel currently is selling at \$44 per share. You buy 500 shares using \$18,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 7%. a. What is the percentage increase in the net worth of your brokerage account if the price of Xtel immediately changes to: (i) \$50.60; (ii) \$44; (iii) \$37.40? What is the relationship between your percentage return and the percentage change in the...

• ### Suppose you purchase 600 shares of stock at \$33 per share with an initial cash investment...

Suppose you purchase 600 shares of stock at \$33 per share with an initial cash investment of \$9,900. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate. Ignore dividends. a. Calculate your return on investment one year later if the share price is \$41. Suppose instead you had simply purchased \$9,900 of stock with no margin. What would your rate of return have been now? (Do not round intermediate calculations. Enter...

• ### Suppose you bought 900 shares of stock at an initial price of \$44 per share. The...

Suppose you bought 900 shares of stock at an initial price of \$44 per share. The stock paid a dividend of \$0.42 per share during the following year, and the share price at the end of the year was \$39. a. Compute your total dollar return on this investment. (A negative value should be indicated by a minus sign.) b. What is the capital gains yield? (A negative value should be indicated by a minus sign. Do not round intermediate...

• ### Suppose you purchase 500 shares of stock at \$48 per share with an initial cash investment...

Suppose you purchase 500 shares of stock at \$48 per share with an initial cash investment of \$8,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate. a. Calculate your return on investment one year later if the share price is \$56. Suppose instead you had simply purchased \$8,000 of stock with no margin. What would your rate of return have been now? (Do not round intermediate calculations. Enter your answers...