Your brokerage account is not approved for option trading

Assignment Help Financial Management
Reference no: EM131452396

"Based on your evaluation of Chipotle, a similar company to El Pollo Loco, you feel strongly that El Pollo Loco stock will rise by 6% over the next 12 months (although you are not sure exactly when this will occur). You want to purchase 1000 shares, but your current cash balance only allows for 700 shares. Your broker charges 7.5% in interest for a margin loan. Your brokerage account is not approved for option trading. What is your best strategy for purchasing 1000 shares? (Just describe a transaction- don’t attempt the math)"

The answer the professor put to this question was "Buy El Pollo Loco shares, short Chipotle"...could someone please explain how they got to that conclusion, I thought since they were not approved for options trading they could not short a stocks?

Reference no: EM131452396

Questions Cloud

Analysis of an emerging issue or challenges : Write a paper that fully explores, explains and expands on the Analysis of an Emerging Issue or Challenges pertaining to Human Resource Management in the public
What were the underlying causes of the depression : What were the underlying causes of the depression? Why did the Great Depression of the 1930s seem so much worse than any occurring either before or since
Entertain combination services : Cruise ships do not entertain combination services. Cruise ships are strictly passenger ships, while cargo and container ships are utilized to ship goods across
What recommendations do you have to change the process : How does your organization/leaders deal with change and communicate change? What recommendations do you have to change the process?
Your brokerage account is not approved for option trading : Your brokerage account is not approved for option trading. What is your best strategy for purchasing 1000 shares?
Conduct research to determine recurrent themes : Conduct research to determine recurrent themes. Identify a problem, issue, or situation in the health care organization that must be addressed.
What is lead time : A certain part is routed through six machines in a batch production plant. The setup and operation time for each machine are given in the table below.
Provide critical analyses of available research literature : Research studies should be summarized with detail, including the findings, how they were obtained, and any biases and limitations affecting the findings.
Prepare a schedule analyzing the changes : ACC 245 D20 Spring 2017 - Depreciation Course Value - This schedule should include columns for beginning balance, increase, decrease, and ending balance for each of the plants asset accounts. Do not analyze changes in accumulated depreciation and ..

Reviews

Write a Review

Financial Management Questions & Answers

  Project create in present value terms

TeleStark is considering building a new manufacturing plant. This plant will cost $9 million to build. The new plant will produce cash inflows of $2.05 million per year for the next 7 years. TeleStark already owns the land on which it intends to buil..

  The sustainable growth rate for the company

Coheed, Inc., had equity of $160,000 at the beginning of the year. At the end of the year, the company had total assets of $224,000. During the year the company sold no new equity. Net income for the year was $72,000 and dividends were $46,080. The s..

  The internal rate of return

The internal rate of return

  How would you measure diversification between funds

Respond to the following client statement: a prospective client comes into your office looking for investment advice. The client feels that s/he is appropriately diversified because the portfolio currently holds six different growth mutual funds, hen..

  Dividends are expected to grow at constant rate

Gilmore, Inc., just paid a dividend of $2.65 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. Assume investors require a return of 10 percent on this stock. What is the current price? ..

  Defined-benefit plan or defined-contribution pension plan

As an employee, would you prefer to participate in a defined-benefit plan or a defined-contribution pension plan? Explain your answer, being explicit in considering the advantages and disadvantages of each plan, and which are most important to you.

  Pay off the balance of his loan

Hank purchased a $28,000 car two years ago using a 8 percent, 4-year loan. He has decided that he would sell the car now, if he could get a price that would pay off the balance of his loan. What’s the minimum price Hank would need to receive for his ..

  What is the duration if the yield to maturity

Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6.7%. What is the duration if the yield to maturity is 10.7%?

  Consider two assets with expected return

Consider two assets with expected return E(r1)=0.3, E(r2)=0.56; with variances σ12=0.1, σ22=0.25 and covariance σ12=0.15 . The risk free rate is 0.14. Find the normalized weight w1 and w2 of the efficient portfolio (the tangency portfolio) of risky a..

  Present value of these payments if the discount rate

You will receive annual payments of $2,400 at the end of each year for 15 years. The first payment will be received in year 6. What is the present value of these payments if the discount rate is 7 percent?

  Where the assets of firm are transferred to the debt-holders

A leveraged buyout involves individuals assuming large personal debt loads in order to purchase the company from a previous owner. Preferred stock is considered a hybrid because the value can increase, like common stock, but it also offers interest p..

  What is the bonds yield to maturity today

Last year a company issued 12-year 10% semiannual coupon bond at its par value of $1000. What is the bond’s yield to maturity today if the bond sells for $1050 now?

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