Maurice Tutor

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    Argosy University/ Phoniex University/
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    Oct-2001 - Nov-2016

Category > Accounting Posted 31 Jul 2017 My Price 4.00

margin requirement

Investor A buys 100 shares of SLM Inc. at $35 a share and holds the stock for a year. Investor B buys 100 shares on margin. The margin requirement is 60 percent, and the interest rate on borrowed funds is 8 percent.
a. What is the interest cost for investor A?
b. What is the interest cost for investor B?
c. If they both sell the stock for $40 after a year, what percentage return does each investor earn?
d. In both cases, the value of the stock has raised the same. Why are the percentage returns different?

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Maurice Tutor
(5)
Status NEW Posted 31 Jul 2017 07:07 PM My Price 4.00

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