72. Ina purchased 800 shares of Detroit Motors stock at a price of $55 a share. The initial margin requirement is 65 percent and the maintenance margin is 30 percent. The effective interest rate on the margin loan is 4.69 percent. How much margin interest will she pay if she repays the loan in seven months? Margin interest = [(1 + .0469)7/12 - 1] × [800 × $55 × (1 - .65)] = $417.29 Accessibility: Keyboard Navigation Blooms: Apply Learning Objective: 02-03 How to calculate initial and maintenance margin. Level of Difficulty: 1 Easy Section: 2.3 Topic: Margin Interest 73. Today, you are purchasing 100 shares of stock on margin. The purchase price per share is $35. The initial margin requirement is 70 percent and the maintenance margin is 30 percent. The call money rate is 4.5 percent and you are charged 1.6 percent over that rate. What will your rate of return be if you sell your shares one year from now for $37 a share? Ignore dividends. Initial investment = (100 × $35 × .70) = $2,450 Loan repayment = [100 × $35 × (1 - .70)] × [1 + (.045 + .016)]1 = $1,114.05 Rate of return = [(100 × $37) - $1,114.05 - $2,450]/$2,450 = 5.55 percent Accessibility: Keyboard Navigation Blooms: Apply Learning Objective: 02-03 How to calculate initial and maintenance margin. Level of Difficulty: 2 Medium Section: 2.3 Topic: Hpr with Margin Interest
72. Ina purchased 800 shares of Detroit Motors stock at a price of $55 a share. The initial margin requirement is 65 percent and the maintenance margin is 30 percent. The effective interest rate on the margin loan is 4.69 percent. How much margin interest will she pay if she repays the loan in seven months? Margin interest = [(1 + .0469)7/12 - 1] × [800 × $55 × (1 - .65)] = $417.29 Accessibility: Keyboard Navigation Blooms: Apply Learning Objective: 02-03 How to calculate initial and maintenance margin. Level of Difficulty: 1 Easy Section: 2.3 Topic: Margin Interest 73. Today, you are purchasing 100 shares of stock on margin. The purchase price per share is $35. The initial margin requirement is 70 percent and the maintenance margin is 30 percent. The call money rate is 4.5 percent and you are charged 1.6 percent over that rate. What will your rate of return be if you sell your shares one year from now for $37 a share? Ignore dividends. Initial investment = (100 × $35 × .70) = $2,450 Loan repayment = [100 × $35 × (1 - .70)] × [1 + (.045 + .016)]1 = $1,114.05 Rate of return = [(100 × $37) - $1,114.05 - $2,450]/$2,450 = 5.55 percent Accessibility: Keyboard Navigation Blooms: Apply Learning Objective: 02-03 How to calculate initial and maintenance margin. Level of Difficulty: 2 Medium Section: 2.3 Topic: Hpr with Margin Interest
Fundamentals-of-Investments--Valuation-and-Management-7th-Edition-Jordan,-Miller,-Dolvin-Test-Bank.docx