Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams
ID: 2774269 • Letter: D
Question
Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per share. She borrows $4,000 from her broker to help pay for the purchase. The interest rate on the loan is 8%. a. What is the margin in Dée’s account when she first purchases the stock? (Omit the "$" sign in your response.) Margin $ b-1. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? (Omit the "$" sign in your response.) 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 1 decimal place. Omit the "%" sign in your response.) Rate of return %
Explanation / Answer
Answer (a)
Answer(b-1)
Answer: (b-2)
Answer (c)
Shares 300 Price per share 40 Purchase Price (300*40) 12000 Margin Loan Amount 4000 Initial Cash Layout (12000-4000) 8000 Initial Margin Requirement (8000/12000)*100 66.67%Related Questions
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