You purchased 1000 shares of Dell stock on margin at $70 per share. Assume the initial...

80.2K

Verified Solution

Question

Finance

You purchased 1000 shares of Dell stock on margin at $70 pershare. Assume the initial margin is 50% and the maintenance marginis 40%. Assume the stock pays no dividends, and ignore interest onthe margin loan.
a.What is the rate of return on his investment if the pricerises to $85 per share?
b.What is the margin if Stock price falls to $60 per share, willthe investor receive a margin call ?
c.How far can the stock price fall before a margin call?

Answer & Explanation Solved by verified expert

3.8 Ratings (524 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

You purchased 1000 shares of Dell stock on margin at $70 pershare. Assume the initial margin is 50% and the maintenance marginis 40%. Assume the stock pays no dividends, and ignore interest onthe margin loan.a.What is the rate of return on his investment if the pricerises to $85 per share?b.What is the margin if Stock price falls to $60 per share, willthe investor receive a margin call ?c.How far can the stock price fall before a margin call?