Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 23 Aug 2017 My Price 9.00

brokerage account

  1. Suppose that Intel currently is selling at $40 per share. You buy 500 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%. (LO 3-4)

    1. What is the percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to (i) $44; (ii) $40; (iii) $36? What is the relation- ship between your percentage return and the percentage change in the price of Intel?

    1. If the maintenance margin is 25%, how low can Intel’s price fall before you get a margin call?

    2. How would your answer to ( b ) change if you had financed the initial purchase with only $10,000 of your own money?

    3. What is the rate of return on your margined position (assuming again that you invest

$15,000 of your own money) if Intel is selling after one year at (i) $44; (ii) $40; (iii) $36? What is the relationship between your percentage return and the percentage change in the price of Intel? Assume that Intel pays no dividends.

    1. Continue to assume that a year has passed. How low can Intel’s price fall before you get a margin call?

Answers

Maurice Tutor
(5)
Status NEW Posted 23 Aug 2017 11:08 AM My Price 9.00

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