Suppose you want to buy 400 shares of Starbucks (SBUX) at $75 per share. Initial...
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Finance
Suppose you want to buy 400 shares of Starbucks (SBUX) at $75 per share. Initial margin requirement is 65%. Call money rate plus the spread is 7%. You supplied cash just to meet the initial margin requirement and invested the rest on margin. *try showing your work using the Balance sheet form
Q1. How much did you supply and how much did you borrow?
Q2. 1 year later, suppose the price is $60 per share. What is your HPR on your margins account? What is the HPR if you had not invested on margin (i.e. using cash account)?
Q3. Suppose your maintenance margin is 40%. At what price will you receive a margin call?
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