Question

112 If you want to keep your position one llaintenance margina Initial cash what share price will you b despite the stock price plunge, what alter 14 Margin and Leverage (LO3 and you are charged a 1.5 percen for each of the following share, a. 556 b. $48 c. $32 rice will you be subject to a margin call? If you olunge, what alternatives do you have? Leverage (LO3, CFA4) In Problem 13. Supp ed a 1.5 percent premium over this rate. Calculate llowing share prices one year later. Ignore dividende em 13. suppose the call money rate is 5 e Calculate your return on investmen ased $8.000 of stock with no margin. What would your Suppose instead you had simply purch rate of return have been now? 15. Margin and Leverage (LO3. CFA spread of 1.2 percent over that. You buy i money rate is 5.6 percent, and you pay a - Vorgin and Leverage (LO3, CFA4) Suppose the call money rate is 56 ent over that. You buy 1,000 shares at $40 per share with an initial maroin of cis selling for $45 per share and you close out your position 50 percent. One year later, the What is your return assuming no dividends are paid? 16. Margin and Leverage (LO3, CFA4) Suppose the call money rate is 45 ner a spread of 2.5 percent over that. You buy 800 shares of stock at $34 per share. You put up $15.000. One year later, the stock is selling for $48 per share and you close out your position What is your return assuming a dividend of $0.64 per share is paid? 17. Margin Interest (LO3, CFA4) Suppose you take out a margin loan for $50,000. The rate you pay is an 8.4 percent effective rate. If you repay the loan in six months, how much interes you pay? 8. Margin Interest (LO3, CFA4) Suppose you take out a margin loan for $73 a 6.4 percent effective rate. If you repay the loan you pay? . Annualized Returns (CFA1) Suppose you hold a particular ate. If you repay the loan in two months, how much interest old a particular investment for seven month rannualized that

can I have the answers for q15-16

Answer 1

15.Account value in the beginning =1000*$40=$40,000

Initial margin=50%*40000=$20,000

Amount borrowed =40000-20000=$20,000

Stock Price after one year =$45

Account Value =1000*$45=$45,000

Interest rate=5.6+1.2=6.8%=0.068

Amount to be paid back with interest =20000*(1+0.068)=$21,360

Amount received on hand =45000-21360=$23,640

Amount invested =$20,000

Return =(23640/20000)-1=0.1820

Return=18.20%

16.

Account value in the beginning =800*$34=$27,200

Initial margin=$15,000

Amount borrowed =27200-15000=$12,200

Stock Price after one year =$48

Account Value =800*$48=$38,400

Interest rate=4.5+2.5=7%=0.07

Amount to be paid back with interest =12200*(1+0.07)=$13,054

Amount received on hand =38400-13054=$25,346

Amount of dividend received=800*$0.64=$512

Total amount in hand =25346+512=$25,858

Amount invested =$15,000

Return =(25858/15000)-1=0.7239

Return=72.39%