The advantage of this method is that you are certain

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The advantage of this method is that you are certain of your maximum purchasing cost and minimum selling price (buying and selling, respectively), but the disadvantage is that the market may not act in favor of the limits you have set and you may not be able to execute your trade. 5. You purchased 100 shares of INTC common stock on margin at $70 per share. Assume the initial margin is 50% and the maintenance margin is 30%. Below what stock price level would you get a margin call (assume no dividends and ignore any interest on the margin account)? Margin call: (100P - $3,500)/100P = .3 70P = $3,500 P = $50 6. Funds R Us (FRU), a Philadelphia-based mutual fund company, has investments in the following securities: Security Price Shares Owned Arco Petroleum $75 10,000 Bed Bath and Beyond $23 15,000 Cisco $11 8,000 FRU also has expenses totaling $52,500 and has shares outstanding of 175,000. a. What is FRU’s net asset value (NAV))? Market Value of Assets = ($75 x 10,000) + ($23 x 15,000) + ($11 x 8,000) = $1,183,000 NAV = (Market Value of Assets – Liabilities) / Shares Outstanding ($1,183,000 - $52,500)/ 175,000 = $6.46 b. If FRU has an offer price of $7 per share, what is the front-end load fee for FRU? Front-end load fee = (175,000 x $7) – (175,000 - $6.46) = $94,500
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