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You bought 1,000 shares of Costco (COST) on margin at $60 per share. Your initial margin was 75% and your maintenance margin is 50%. You borrowed at the 9 percent call money rate. You sell Costco (COST) 4 months later for $63. There was a $0.55 dividend paid during your holding period.
a) Calculate the dollar amount of your borrowing.
b) Using your answer to part a), calculate your holding period return.
c) Calculate how far the stock price can fall before you are subject to a margin call. (ignore dividends and the interest due on the loan)
Exchange rate systems vary in the degree to which a country’s central bank controls its currency’s exchange rate. This week’s discussion question centers on the use of foreign exchange markets. Discuss the four exchange rates forecasting methods and ..
The M Company has an EBIT of $250,000 that is constant over time and a corporate tax rate of 35%. Company M uses $5,500,000 of debt financing. If M used no debt, its cost of equity would be 12%. According to the Modigliani Miller theory with corporat..
Consider the following 2012 data for Newark General Hospital (in millions of dollars): Calculate and interpret the two profit variances. Calculate and interpret the two revenue variances. Calculate and interpret the two cost variances.
FITCO Inc. is a Pharmaceutical company which is considering investing in a new equipment for the production of pain-reliever machine for individuals who suffer from cardio vascular diseases. Calculate the initial outlay of the project. Calculate the ..
What is the Macaulay duration of a 5.2 percent coupon bond with eight years to maturity and a current price of $1,053.10? What is the modified duration?
What happens to a discount bond as the time to maturity decreases?
Little Books Inc. recently reported $13 million of net income. Its EBIT was $32.5 million, and its tax rate was 35%. What was its interest expense? [Hint: Write out the headings for an income statement and then fill in the known values. Then divide $..
When preparing capital budgeting analysis for a new project, Chris Johnson, a chief financial officer at BT Industries, faced a dilemma. The project involved a production of new type of shipping containers, What is the Present Value of this project?
Company B does not slow back any earnings and is expected to produce a level dividend stream of $8 a share. If the current stock price is $65, what is the market capitalization rate?
A large retailer obtains merchandise under the credit terms of 1/15, net 45, but routinely takes 60 days to pay its bills. (Because the retailer is an important customer, suppliers allow the firm to stretch its credit terms.) What is the retailer's e..
Which of the following statements concerning the “gross-up” rule is (are) correct? I Income taxes paid in the year of death are includible in the deceased’s gross estate. Gift taxes paid in the year of death are included in the deceased’s gross estat..
Lohn Corporation is expected to pay the following dividends over the next four years: $20, $16, $15, and $8.50. Afterward, the company pledges to maintain a constant 5 percent growth rate in dividends forever. If the required return on the stock is 1..
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