You are looking into purchasing stock of Broken at of your own money as possible (i.e. maximizing the amount of margin possible). You have $5,000 to invest. If initial margin is 50%, how many shares can you buy?
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- You want to purchase IBM stock at $130 from your broker using as little of your own money as possible. If initial margin is 50% and you have $19, 600to invest, how many shares can you buy?1.) You purchase 600 shares of XYZ Corporation at $30 per share using an initial margin of 70%. The stock is now selling for $41 per share and you want to use the excess equity in your account to pyramid. You want to purchase 400 shares of JT Corporation at $122 per share. If the minimum initial margin is 60%, what is the minimum amount of equity that you will have to put up in this transaction? 2. You purchase 500 shares of Johns Incorporated at $50 per share using an initial margin of 60%. Your maintenance margin is 25% and the minimum initial margin is 50%. A. How low can the stock price fall before you receive a margin call? B. If the stock price falls to $21 a share, how much additional equity must you add to your account?You purchase 1,000 shares of WMT (Walmart) for $143 per share. A year later, you sell the stock for $166 per share. You receive a dividend of $2.27 a share. a.What is your total dollar return? b. What are your dividend yield, capital gain yield, and total percentage return? Note: don't use chat gpt.
- You want to purchase some shares of Eagle Landers stock but need a 11 percent rate of return to compensate for the perceived risk of such ownership. What is the maximum you are willing to spend per share to buy this stock if the company pays a constant $0.84 annual dividend per share? You must use the financial calculator to solve this question and please leave at least 2 decimal places.Which of the following would offer the best return on investment? Assume that you buy $5,000 in stock in all three cases, and ignore interest and transaction costs in all your calculations. Also assume that decimal number of stocks can be bought so all the amount discussed is invested into the stocks in all three cases. Buy a stock at $90 without margin, and sell it a year later at $105. Buy a stock at $70 with 50% margin (50% loan), and sell it a year later at $85. Buy a stock at $65 with 25% margin (75% loan), and sell it a year later at $80. Alternative offers the best return on the investment.Suppose you think that the market price of a share of Facebook will increase in the next few months from its current price of $200 per share. Suppose as well that you have $10,000 to invest - enough money to buy 50 shares. If you buy on margin, though, you can purchase an additional 50 shares for a total of 100 shares. (This assumes a 50% margin requirement.) If three months from now Facebook stock is worth $225 per share and you sell your shares, how much MORE money did you make by buying on margin compared to buying shares without the use of margin. (Note that we ignore the cost of borrowing.) $1000 $2,500 $1,250 $250 $750
- 2. You purchase 600 shares of Jenkins Corporation at $30 per share using an initial margin of 70%. The stock is now selling for $41 per share and you want to use the excess equity in your account to pyramid. You want to purchase 400 shares of Watson Corporation at $122 per share. If the minimum initial margin is 60%, what is the minimum amount of equity that you will have to put up in this transaction?2. Suppose you buy shares of a stock worth OMR20000 and the initial margin is 50% and the maintenance margin is 30%. A. How much money must you pay the broker for the shares? How much have you borrowed from the broker? B. Suppose the price of the stock falls so that the shares are only worth OMR10000. What would be your nev account equity? C. How much money you need to give the broker to meet the maintenance margin?Suppose you short sell 100 shares of Twitter priced at $50 a share. The initial margin is 50% and the maintenance margin is 30%. a. Show the initial balance sheet view of your position, including assets, liabilities, & owners’ equity. b. At what price of the stock will your return be 45%?
- You decided to invest $10,000 of your savings in a stock whose current price is $25 per share. To utilize the benefit of margin investing, you borrowed an additional $10,000 from your broker and invested $20,000 in the stock, If the maintenance margin is 30 pereent, at what price will you receive your first margin call?Suppose that you sell short 1000 shares of Xtel, currently selling for $50 per share, and give your broker $40,000 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) $55; (ii) $50; (iii) $46? Assume that Xtel pays no dividends. (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? (Round your answer to 2 decimal places.) 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.)4. (a) Suppose you decide to short sell some GameStop shares. Their cur- rent price is $5, and you have $5000 available to you. Your broker tells you that you have an initial margin requirement of 50%, with maintenance margin 35%. i. How many shares can you shortsell? How much cash will there be in the margin account? ii. Suppose GameStop rises in value to $6 per share. What percent- age margin do you have now? iii. How high will GameStop have to rise before you will get a margin call? (b) Suppose you have purchased some GameStop shares on margin at $5 per share. You ask your broker to put in a limit sell order at $7, and a stop loss order at $4.50. i. What will happen if the stock price falls to $4.50? ii. What will happen if the stock price rises to $7? iii. Now suppose you had instead short-sold your GameStop shares (as in the first part of the question). What instructions might you give to your broker to minimise your losses and lock in your gains? (c) It is more difficult to…