HW1 - rate of return on this investment? 3. Suppose you buy...

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Homework I (due Wednesday, 2/3/2010) 1. Pat just made a margin purchase of 100 shares of ABC Corp. for $45 per share. The initial margin is 70%. The maintenance margin is 30%. How low can the price of each share of ABC be before Pat will have to add equity to his account? 2. Nancy sells short 100 shares of XYZ stock at $31.25 per share, the initial margin is 50%. Six months later she purchases the shares at $29.00 each. Ignoring brokerage fees, what is the
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Unformatted text preview: rate of return on this investment? 3. Suppose you buy a round lot of Altman Industries stock on 50% margin when it is selling at $35 a share. The broker charges a 10 percent annual interest rate and commissions are 5 percent of the total stock value on both the purchase and the sale. If at year end you receive a $1.00 per share dividend and sell the stock for $42.63, what is your rate of return on the investment?...
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This note was uploaded on 05/27/2011 for the course FIN 4504 taught by Professor Wang during the Fall '10 term at Florida A&M.

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