The price of the stock go before you get a margin call

Assignment Help Financial Management
Reference no: EM131012414

You are bearish on AT&T stocks and decide to sell short 100 shares at the current market price of $15 per share. The initial margin requirement is 50% and the maintenance margin requirement is 30%.

a. How high can the price of the stock go before you get a margin call?

b. If you earn no interest on the funds in your margin account, what will be the rate of return after one year if AT&T stock is selling at (i) $20 and (ii) $12.50?

Reference no: EM131012414

Questions Cloud

Explain the physical and biological developments : Explain the physical and biological developments that occur throughout the lifespan as it relates to parenting? Provide examples of how moral development is influenced over the lifespan as it relates to parenting
What is the percentage price change of these bonds : Bond J has a coupon rate of 4 percent and Bond K has a coupon rate of 10 percent. Both bonds have 17 years to maturity, make semi annual payments, and have a YTM of 7 percent. If interest rates suddenly rise by 2 percent, what is the percentage price..
Write a treatment plan : Below is a mock case study. You are to write a treatment plan. Your plan must include and consider information about the patient's background. You must prioritize treatment goals, and determine a course of action for the mock patient to help the p..
Describe the active portfolio management process : Describe the active portfolio management process. Assuming you are a portfolio manager with similar portfolio allocation decisions as in the case, but today, in the current market conditions. Which stock you consider adding to your portfolio?
The price of the stock go before you get a margin call : You are bearish on AT&T stocks and decide to sell short 100 shares at the current market price of $15 per share. The initial margin requirement is 50% and the maintenance margin requirement is 30%. How high can the price of the stock go before you ge..
What is total yield-dividend yield and capital gain yield : The Rapid Inc. is a fast growing company. It is expected to grow by 20% for the next 3 years after which it will grow moderately at the rate of 6% annually for the foreseeable future. What is the maximum price you are willing to pay for this rapid st..
What is the annual payment required by the mortgage : Suppose you purchase a home for $400,000. After making a down payment of $60,000, you borrow the balance through a mortgage loan at 8 percent for 20 years. What is the annual payment required by the mortgage? Round your answer to the nearest dollar.
What are the cash flows for this replacement project : Five years ago, Domingo Pizzeria Company purchased an oven for $30,000. The projected life of the oven was 10 years with zero salvage value (depreciating at $3,000 a year.) The current book value of the oven is $15,000, whereas the current market val..
What is the dollar sales volume the firm : Rocking Motors Inc manufactures motorized wheel chairs. The average selling price for the various units is $500. The associated costs is $300 per unit. Fixed costs for the firm average $180,000 annually. Company has $1,000,000 debt paying 12% interes..

Reviews

Write a Review

Financial Management Questions & Answers

  Variety of approaches to purchasing power parity

You were introduced to a variety of approaches to purchasing power parity. Select one purchasing power parity approach and explain why you chose it. Assess the approach you selected, identifying its characteristics and advantages for forecasting. In ..

  How a firm determine its optimal capital structure

How a firm determine its optimal capital structure. Explain how they do it. Why might optimal capital structure differ across industries? Explain.

  What is market and book ratio

Jaster Jets has $9 billion in total assets. Its balance sheet shows $1.8 billion in current liabilities, $5.4 billion in long-term debt, and $1.8 billion in common equity. It has 700 million shares of common stock outstanding, and its stock price is ..

  Expected return on the stock fund

Your retirement strategy is to invest 500 per month in an equity mutual fund and 200 per month in a bond fund. Your retirement date is 30 years from now. The expected return on the stock fund is expected to be 8% and the expected return on the bond f..

  Defines the value of a firm

Which of the following defines the value of a firm?

  Present value of an annuity to increase

Which of the following would cause the present value of an annuity to increase?

  Determine the companys wacc by computing

Merrill Lynch Limited has the following information and a tax rate of 30 percent. . Debt 2,000, 6 percent coupon bonds outstanding, $1,000 par value, 12 years to maturity, selling for 95 percent of par, the bonds make semiannual payments Common stock..

  Interests were affected by hidden obsolete inventroy

Before finalizing these plans, two stores were remodeled as a test. Lisa Lee, assistant controller, was asked to oversee the financial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales gro..

  Merger valuation-what is the value of its tax shields

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7.8%. What is the value of its tax shields? What is t..

  What is value of stock today-expanding rapidly and currently

Microtech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Microtech to begin paying dividends, beginning with a dividend of $1.25 coming 3 years from toda..

  How much does your payment go down in the better option

You buy a house for $150,000 using a 30-year mortgage at 4.5% interest to be paid monthly.1. What is your payment? 2.Your generous parents agree to give you $10,000 toward your home 4.They offer either to make a down payment (lessening the principal ..

  What would happen to interest rates and bond prices

One-year zero coupon treasury bonds are selling for £975.61 in the U.K. and for $963.86 in the U.S. Assume $1,000 face value in dollars for the U.S. bond and £1,000 face value for the U.K bond, and round interest rates to two decimal places, e.g. 2.5..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd