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DAe Trader opens a bra foraged account and purchases 100 shares of Intel dooms n

ID: 2740862 • Letter: D

Question

DAe Trader opens a bra foraged account and purchases 100 shares of Intel dooms not $68 per share. She borrows $2, 200 from her broker to help pay for the purchase. The interest Rate can the loan is 12%. DRK, Inc., has just sold 150.000 pharos in an initial public offering. The underwriter's explicit fees were $90,000. The offering pence for the shares was $52, but immediately upon issue, the share price jumped to $60.50. What is the total cost to DRK of the equity issue? b. Is the entire cost of the underwriting a source of profit to the underwater?

Explanation / Answer

a.

100 shares at the rate of 58$ per share costs = 100*58 = $5800

Amount she borrowed = $2200

Amount she initially had = 5800-2200 = $3600

Initial margin = $2200

b.

Share price falls to $48

Loss made = (58-48)*100 = $1000

Remaining balance in account = 3600-1000 = 2600

Remaining margin = 2600/4800 = 54.167%

b.2.

Minimum amount the account must have = 5800*0.3 = 1740

But the account has 2600, so she would not receive a margin call.

C. To calculate rate of return more information is required. At what price is the stock trading currently to calculate the return?