Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming. To compute: Rate of return after 1 year if company X’s stock is sold.

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Answer 1

Question

Chapter 3, Problem 12PS

a.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To compute: Rate of return after 1 year if company X’s stock is sold.

b.

Summary Introduction

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor.

To identify: Company X’s price before getting a margin call.

c.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To analyze: Rate of return and rise in price.

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.Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account. a.If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Xtel pays no dividends. b.If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? c.Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.13.

Suppose that you sell short 1000 shares of Xtel, currently selling for $50 per share, and give your broker $40,000 to establish your margin account. a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $55; (ii) $50; (iii) $46? Assume that Xtel pays no dividends. (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.) b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call? (Round your answer to 2 decimal places.) c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $2 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)

Suppose that you sell short 1,000 shares of Xtel, currently selling for $20 per share, and give your broker $15,000 to establish your margin account.a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: (i) $22; (ii) $20; (iii) $18? Assume that Xtel pays no dividends.b. If the maintenance margin is 25%, how high can Xtel’s price rise before you get a margin call?c. Redo parts (a) and (b), but now assume that Xtel also has paid a year-end dividend of $1 per share. The prices in part (a) should be interpreted as ex-dividend, that is, prices after the dividend has been paid.

Answer 2

Question

Chapter 3, Problem 12PS

a.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To compute: Rate of return after 1 year if company X’s stock is sold.

b.

Summary Introduction

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor.

To identify: Company X’s price before getting a margin call.

c.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To analyze: Rate of return and rise in price.

Expert Solution & Answer

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Answer 3

Question

Chapter 3, Problem 12PS

a.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To compute: Rate of return after 1 year if company X’s stock is sold.

b.

Summary Introduction

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor.

To identify: Company X’s price before getting a margin call.

c.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To analyze: Rate of return and rise in price.

Expert Solution & Answer

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Answer 4

Question

Chapter 3, Problem 12PS

a.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To compute: Rate of return after 1 year if company X’s stock is sold.

b.

Summary Introduction

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor.

To identify: Company X’s price before getting a margin call.

c.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To analyze: Rate of return and rise in price.

Expert Solution & Answer

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Answer 5

Chapter 3, Problem 12PS

a.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To compute: Rate of return after 1 year if company X’s stock is sold.

b.

Summary Introduction

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor.

To identify: Company X’s price before getting a margin call.

c.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To analyze: Rate of return and rise in price.

Answer 6

Chapter 3, Problem 12PS

a.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To compute: Rate of return after 1 year if company X’s stock is sold.

Answer 7

Chapter 3, Problem 12PS

a.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To compute: Rate of return after 1 year if company X’s stock is sold.

Answer 8

b.

Summary Introduction

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor.

To identify: Company X’s price before getting a margin call.

Answer 9

b.

Summary Introduction

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor.

To identify: Company X’s price before getting a margin call.

Answer 10

c.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To analyze: Rate of return and rise in price.

Answer 11

c.

Summary Introduction

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To analyze: Rate of return and rise in price.

Answer 12

Expert Solution & Answer

Answer 13

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Answer 14

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Answer 15

Ch. 3 - Prob. 1PS Ch. 3 - Prob. 2PS Ch. 3 - Prob. 3PS Ch. 3 - Prob. 4PS Ch. 3 - Prob. 5PS Ch. 3 - Prob. 6PS Ch. 3 - Prob. 7PS Ch. 3 - Prob. 8PS Ch. 3 - Prob. 9PS Ch. 3 - Prob. 10PS

Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming. To compute: Rate of return after 1 year if company X’s stock is sold.

Solution Summary: The author explains how a margin account allows an investor to borrow funds to purchase securities.

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To compute: Rate of return after 1 year if company X’s stock is sold.

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor.

To identify: Company X’s price before getting a margin call.

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To analyze: Rate of return and rise in price.

Want to see the full answer?

Chapter 3 Solutions

Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming. To compute: Rate of return after 1 year if company X’s stock is sold.

Solution Summary: The author explains how a margin account allows an investor to borrow funds to purchase securities.

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming. To compute: Rate of return after 1 year if company X’s stock is sold.

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor. To identify: Company X’s price before getting a margin call.

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming. To analyze: Rate of return and rise in price.

Want to see the full answer?

Chapter 3 Solutions

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To compute: Rate of return after 1 year if company X’s stock is sold.

Introduction:A margin account is a brokerage account that allows an investor to borrow fund to purchase securities. Brokers charge an interest rate on the money which is bowered by investor.

To identify: Company X’s price before getting a margin call.

Introduction: Rate of return is the profit or loss on an investment during a period of time. A short position is a technique used by the trader expected that the value of stock will reduce in forthcoming.

To analyze: Rate of return and rise in price.