Investment Homework (See Attached File)
keaon2
textbook_hw1.docxYou decide to buy 500 shares of stock at a price of $70 and an initial margin of 55 percent. What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 25 percent? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Do not include a minus sign. Omit the "%" sign in your response.)
|
Stock price decline |
% |
|
You believe the stock in Freeze Frame Co. is going to fall, so you short 650 shares at a price of $61. The initial margin is 55 percent. |
|
1. |
Construct the equity balance sheet for the original trade. (Input all amounts as positive values. Omit the "$" sign in your response.) |
|
Assets |
|
Liabilities and account equity |
||
|
Proceeds from sale |
$ |
|
Short position |
$ |
|
Initial margin deposit |
|
|
Account equity |
|
|
|
|
|
|
|
|
Total |
$ |
|
Total |
$ |
|
|
|
|
|
|
|
|
|
2-a. |
Construct an equity balance sheet for a stock price of $56 per share. (Input all amounts as positive values. Omit the "$" sign in your response.) |
|
Assets |
|
Liabilities and account equity |
||
|
Proceeds from sale |
$ |
|
Short position |
$ |
|
Initial margin deposit |
|
|
Account equity |
|
|
|
|
|
|
|
|
Total |
$ |
|
Total |
$ |
|
|
|
|
|
|
|
|
|
2-b. |
What is your margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) |
|
Margin |
% |
|
2-c. |
What is your effective annual return if you cover your short position at this price in 3 months? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.Omit the "%" sign in your response.) |
|
Effective annual return |
% |
|
3-a. |
Construct an equity balance sheet for a stock price of $66 per share.(Input all amounts as positive values. Omit the "$" sign in your response.) |
|
Assets |
|
Liabilities and account equity |
||
|
Proceeds from sale |
$ |
|
Short position |
$ |
|
Initial margin deposit |
|
|
Account equity |
|
|
|
|
|
|
|
|
Total |
$ |
|
Total |
$ |
|
|
|
|
|
|
|
|
|
3-b. |
What is your margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) |
|
Margin |
% |
|
3-c. |
What is your effective annual return if you cover your short position at this price in 3 months?(Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) |
|
Effective annual return |
% |
