DAe Trader opens a bra foraged account and purchases 100 shares of Intel dooms n
ID: 2740862 • Letter: D
Question
DAe Trader opens a bra foraged account and purchases 100 shares of Intel dooms not $68 per share. She borrows $2, 200 from her broker to help pay for the purchase. The interest Rate can the loan is 12%. DRK, Inc., has just sold 150.000 pharos in an initial public offering. The underwriter's explicit fees were $90,000. The offering pence for the shares was $52, but immediately upon issue, the share price jumped to $60.50. What is the total cost to DRK of the equity issue? b. Is the entire cost of the underwriting a source of profit to the underwater?Explanation / Answer
a.
100 shares at the rate of 58$ per share costs = 100*58 = $5800
Amount she borrowed = $2200
Amount she initially had = 5800-2200 = $3600
Initial margin = $2200
b.
Share price falls to $48
Loss made = (58-48)*100 = $1000
Remaining balance in account = 3600-1000 = 2600
Remaining margin = 2600/4800 = 54.167%
b.2.
Minimum amount the account must have = 5800*0.3 = 1740
But the account has 2600, so she would not receive a margin call.
C. To calculate rate of return more information is required. At what price is the stock trading currently to calculate the return?
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