Homework #1 - FIN 4092N

Homework #1 - FIN 4092N - Vladimir Milosavljevic FIN 4092 1...

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Vladimir Milosavljevic FIN 4092 On-Line Assignment #1 1) 250 shares of DIS stocks @ $20/share => Original Stock Value = $5,000 equity percentage = 50% => amount borrowed (debt) = $2,500 maintenance margin = 25% Percentage Equity = EquityStock Value = - Stock Value DebtStock Value Lets label stock value with V 0.25 = - , V $2 500V V - $2,500 = 0.25*V 0.75*V = $2,500 V = $3,333.33 Stock Value = 250 shares * Price/share => Price/share = $3,333.33/250 = $13.33 At price of $13.33 per share of DIS stock, the investor would receive a margin call. 2) Stock value when sold = $20,000 sell short Cash = $10,000 Maintenance margin =30%
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Percentage equity = EquityCurrent Stock Value = + - Stock Value when Sold Cash Current Stock ValueCurrent Stock Value 0.3 = , + , - $20 000 $10 000 VV $30,000 – V = 0.3*V 1.3*V = $30,000 => V = $23,076.92 is the value of the stock at which the investor is going to receive margin call. 3) 200 shares @ $20/share => Original Stock Value = $4,000 equity percentage = 55% A) $4,000 * 0.55 = $2,200 is the amount of cash needed to buy this stock. B) $4000 - $2,200 = $1,800 is the amount that you need to borrow. C) maintenance margin = 25% 0.25 = - , V $1 800V V - $1,800 = 0.25*V 0.75*V = $1,800 V = $2,400 Price /share = $2,400/200 shares = $12/share is the price of the stock at which the investor would receive margin call.
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