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An investor opens her first brokerage account, and purchases 500 shares of Cisco shares at $24 per share. She borrows $5,000 from her broker to help pay for the purchase. The interest rate of the loan is 3.5%.
a) What is the initial margin in her account when she first purchases the stock?
b) If the price falls to $20 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 35%, will she receive a margin call?
c) What is the rate of return on the investment if she sells the shares at the end of the year at $20 per share?
Procrastinators Anonymous (PA) is hosting their annual convention this coming year in Dallas, TX. Although this is not typical of this organization, they wish to plan ahead to determine what the cost of the keynote banquet ticket should be.
A firm has a WACC of 10% until it has raised $100 million. Beyond that the WACC is 12%. The firm has the following projects and associated costs: Project A has a cost of $50 million and an IRR of 14%; project B has a cost of $70 million and an IRR of..
Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 87 percent as high if the price is raised 14 percent. What ..
A mortgage lender tells you that you can afford to spend $1,000/month on a mortgage. At a rate of 6.0%, what is the loan amount that you will qualify for assuming a 30-year mortgage, payable monthly? Assuming a 20% down payment, what is the maximum p..
Explain why purchasing a high-growth mutual fund can be a worse investment than taking out a second mortgage on a home and investing in the market index.
A parent decides to buy a two bedroom condo for 65,000 by putting 10% down and financing the rest for 15 years at an annual rate of 3.5%. What is the monthly payment? One bedroom rented out to a roomTe for $400 a month. After 4 years, the parent Ella..
After discovering a new gold vein in the Colorado Mountains, CTT Mining Corporation must decide whether to go ahead and develop the deposit. The most cost-effective method of mining gold is sulphuric acid extraction, a process that results in environ..
General Cereal common stock dividends have been growing at an annual rate of 7 percent per year over the past 10 years. Current dividends are $1.70 per share. What is the current value of a share of this stock to an investor who requires a 12 percent..
What is the Break-even Point
What elements of the film leave a lasting impression on the viewer?
The shareholders of the Pickwick Paper Company need to elect eight directors. There are 200,000 shares outstanding. What is the minimum number of shares you need to own to ensure that you can elect at least one director if the company has majority vo..
If a firm repurchases its stock in the open market, the shareholders who tender the stock are subject to capital gains taxes. If you own 100 shares in a company’s stock and the company’s stock splits 2 – for – 1, then you will own 200 shares in the c..
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