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# A stock sells for \$ 10 per share. You purchase 100 shares

### Customer Question

A stock sells for \$ 10 per share. You purchase 100 shares for \$ 10 a share ( i. e., for \$ 1,000), and after a year the price rises to \$ 17.50. What will be the percentage return on your investment if you bought the stock on margin and the margin requirement
was ( a) 25 percent, ( b) 50 percent, and ( c) 75 percent? ( Ignore commissions, dividends, and interest expense.)
Submitted: 1 year ago.
Category: Multiple Problems
Customer: replied 1 year ago.
Repeat Problem 1 to determine the percentage return on your investment but in this case suppose the price of the stock falls to \$ 7.50 per share. What generalization can be inferred from your answers to Problems 1 and 2?
Customer: replied 1 year ago.
You purchase 100 shares of stock at \$ 100 (\$ 10,000); the margin requirement is 40 percent. What are the dollar and percentage returns if a) you sell the stock for \$ 112 and bought the stock for cash? b) you sell the stock for \$ 90 and bought the stock on margin? c) you sell the stock for \$ 60 and bought the stock on margin?
Customer: replied 1 year ago.
Investor A buys 100 shares of SLM Inc. at \$ 35 a share and holds the stock for a year. Investor B buys 100 shares on margin. The margin requirement is 60 percent, and the interest rate on borrowed funds is 8 percent. a) What is the interest cost for investor A? b) What is the interest cost for investor B? c) If they both sell the stock for \$ 40 after a year, what percentage return does each investor earn? d) In both cases, the value of the stock has risen the same. Why are the percentage returns different?
Customer: replied 1 year ago.
Investor A makes a cash purchase of 100 shares of AB& C common stock for \$ 55 a share. Investor B also buys 100 shares of AB& C but uses margin. Each holds the stock for one year, during which dividends of \$ 5 a share are distributed. Commissions are 2 percent of the value of a purchase or sale; the margin requirement is 60 percent, and the interest rate is 10 percent annually on borrowed funds. What is the percentage earned by each investor if he or she sells the stock after one year for ( a) \$ 40, ( b) \$ 55, ( c) \$ 60, and ( d) \$ 70? If the margin requirement had been 40 percent, what would have been the annual percentage returns? What conclusion do these percentage returns imply?
Customer: replied 1 year ago.
Ms. Tejal Gandhi has decided that the stock of SmallCap Inc is overvalued at \$ 4 a share and wants to sell it short. Since the price is relatively low, short sales cannot be executed on margin, so Ms. Gandhi must put up the entire value of the stock when it is sold short. a) What is the percentage loss if the price of the stock rises to \$ 8? b) What is the percentage loss if the price of the stock rises to \$ 10? c) What is the percentage gain if the company goes bankrupt and is dissolved? d) What are the maximum percentage gain the short seller can earn and the largest percentage loss the short seller can sustain?
Customer: replied 1 year ago.
An investor sells a stock short for \$ 36 a share. A year later, the investor covers the po-sition at \$ 30 a share. If the margin requirement is 60 percent, what is the percentage return earned on the investment? Redo the calculations, assuming the price of the stock is \$ 42 when the investor closes the position.
Customer: replied 1 year ago.
What is the percentage return earned by Darin if he acquires 100 shares, holds the stock for a year, and sells the stock for \$ 80?
What is the percentage return earned by Vic-tor if he acquires 100 shares on margin, holds the stock for a year, and sells the stock for \$ 80? What advantage does buying stock on margin offer Victor?
Customer: replied 1 year ago.
If the maintenance margin requirement were 30 percent and the price of the stock declined to \$ 50, what impact would that have on each brother’s position? At what price of the stock would they receive a margin call?
Expert:  PDtax replied 1 year ago.
Hi from just answer. I'mCustomer and can assist.
I would ask for a bit more \$\$ to do all of these.
Accept the offer, and I am on it this afternoon.
Customer