Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams
ID: 2763932 • Letter: D
Question
Dée Trader opens a brokerage account and purchases 100 shares of Internet Dreams at $58 per share. She borrows $2,200 from her broker to help pay for the purchase. The interest rate on the loan is 12%. a. What is the margin in Dée’s account when she first purchases the stock? Margin $ b-1. If the share price falls to $48 per share by the end of the year, what is the remaining margin in her account? (Round your answer to 2 decimal places.) Remaining margin % b-2. If the maintenance margin requirement is 30%, will she receive a margin call? Yes No c. What is the rate of return on her investment? (Negative value should be indicated by a minus sign.Round your answer to 2 decimal places.) Rate of return %
Explanation / Answer
(a) Margin in Dee's account (Equity) = Total assets or total liability and equity - Total liability
= (100 shares * 58) - $2200
= $5800 - $2200
= $3600
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