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Suppose that Intel currently is selling at $20 per share You buy 1000 shares using $15000 of your own money borrowing the remainder of the purchase price from your broker The rate on the margin

Suppose that Intel currently is selling at $20 per share. You buy 1,000 shares using $15,000 of your own money, borrowing the remainder of the purchase price from your broker The rate on the margin loan is 8%. What is the percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to: (i) $22, (ii) $20; (ii) $18? What is the relationship between your percentage return and the percentage change in the price of Intel? (Leave no cells blank be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the sign in your response.) (i) Percentage gain % (ii) Percentage gain % (iii) Percentage gain % If the maintenance margin is 25%, how low can Intel's price fall before you get a margin call? (Round your answer to 2 decimal places. Omit the sign in your response.) Margin call will be made at price or $ or lower How would your answer to (b) change if you had financed the initial purchase with only $10,000 of your own money? (Round your answer to 2 decimal places. Omit the sign in your response.) Margin call will be made at price $ or lower What is the rate of return on your margined position (assuming again that you invest $15,000 of your own money) if Intel is selling after 1 year at: (i) $22, (ii) $20; (iii) $18? What is the relationship between your percentage return and the percentage change in the price of Intel? Assume that Intel pays no dividends. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places. Omit the sign in your response.) (i) Rate of return % (ii) Rate of return % (iii) Rate of return % Continue to assume that a year has passed. How low can Intel's price fall before you get a margin call? (Round your answer to 2 decimal places. Omit the sign in your response.) Margin call will be made at price $ or lower

 

Apr 22 2020 View more View Less

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