Suppose you purchase 1,350 shares of stock at $36 per share with an initial cash

Question

Suppose you purchase 1,350 shares of stock at $36 per share with an initial cash investment of $21,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate.

Calculate your return on investment one year later if the share price is $44. Suppose instead you had simply purchased $21,000 of stock with no margin. What would your rate of return have been now? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Calculate your return on investment one year later if the share price is $36. Suppose instead you had simply purchased $21,000 of stock with no margin. What would your rate of return have been now? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Calculate your return on investment one year later if the share price is $20. Suppose instead you had simply purchased $21,000 of stock with no margin. What would your rate of return have been now?(Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Suppose you purchase 1,350 shares of stock at $36 per share with an initial cash investment of $21,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate.

Explanation / Answer

Ans

Ans a Rate of return 44.93% With out margin rate of return 22.22% Details Amount Purchase Price of shares( 1350 *36)    48,600.00 Initial Margin    21,000.00 Interest Cost (5%+1.5%)*21000      1,365.00 Return from the stock (1350*44-36)    10,800.00 Net Return      9,435.00 % of return= Net return/Initial Margin 44.93% Details Amount Purchase Price of shares    21,000.00 Return from the stock =21000*44/36      4,666.67 Net Return      4,666.67 % of return= Net return/Initial Investment 22.22% Ans b Rate of return -6.50% With out margin rate of return 0.00% Details Amount Purchase Price of shares( 1350 *36)    48,600.00 Initial Margin    21,000.00 Interest Cost (5%+1.5%)*21000      1,365.00 Return from the stock (1350*36-36)                   -   Net Return     -1,365.00 % of return= Net return/Initial Margin -6.50% Details Amount Purchase Price of shares    21,000.00 Return from the stock =21000*0/36                   -   Net Return                   -   Net return % 0.00% Ans c Rate of return -109.36% With out margin rate of return -55.56% Details Amount Purchase Price of shares( 1350 *36)    48,600.00 Initial Margin    21,000.00 Interest Cost (5%+1.5%)*21000      1,365.00 Return from the stock (1350*20-36) -21,600.00 Net Return -22,965.00 % of return= Net return/Initial Margin -109.36% Details Amount Purchase Price of shares    21,000.00 Return from the stock =21000*20/36 -11,666.67 Net Return -11,666.67 Net return % -55.56%

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.