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FIN 4092 Online Assignment _1 Investment Management

FIN 4092 Online Assignment _1 Investment Management -...

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FIN 4092 On-Line Assignment #1 Due Sept 21, 2010 Complete the following problems from Chapter 3: 1. If an investor bought 250 DIS stocks for $20 with an equity percentage of 50%, at what stock price this investor would receive a margin call if the maintenance margin is 25%? 2. If an investor would like to sell short shares originally valued at $20,000 in which his/her cash contribution is $10,000, what is the stock value when the investor receives a margin call if the maintenance margin 30%? 3. You wish to purchase 200 shares of a $20 per share stock using an equity percentage of 55%. (A) How much cash do you need to buy the stock? (B) How much do you need to borrow? (C) If the maintenance margin is 25%, at what stock price would you receive a margin call? (D) If the stock price rises to $30 per share, what is your return? 4. Suppose you have $5,000 to invest and want to buy as much stock in Qwest
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Unformatted text preview: Communications as is possible using margin debt. If your brokerage requires 50% minimum initial margin, and has a 30% minimum maintenance margin requirement, what percent decrease in Qwest Communications’ stock price will trigger a margin call? How much equity will you have after a 15% decline in Qwest Communications’ stock price? 5. Suppose you want to purchase $11,200 worth of stock trading at $28 per share. The broker allows you to borrow money with no less than 50% initial margin. A. How much money can you borrow, and how much of your own money must be used? B. What is the margin percentage if the stock increases to $34 per share? C. If the maintenance margin is 25%, at what price would the stock have to be for you to receive a margin call?...
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