Kareem received a retroactive salary payment of $100,000 and has decided to invest the full amount in Make Some Money Limited stock. In an effort to maximize his returns, he has decided to utilize the available 40% margin. MSM stock is currently trading at $25 and regulators require that investors maintain a margin of at least 20%. a. Deterimine Kareem's debit balance for this investment. b. How many units of the stock can Kareem buy? c. How many can the stock price fall before Kareem receives a margin call? d. Calculate Kareem's Holding period return if he sells the stock for $30 in six months. Assume that no dividends were received. e. Should all investors conduct margin transaction? Explain
Q: 9. A company that sells high-purity laboratory chemicals is considering investing in new equipment…
A: An annuity refers to regular cash flows made at equal intervals and of the same amounts. The future…
Q: Using the sinking fund formula or a financial calculator, complete the following: (Do not round…
A: Amount required (FV) = $26,000 Quarterly period (n) = 20 (i.e. 5 years * 4) Quarterly interest rate…
Q: Analyze the change control process for the retail project's software configuration management. Your…
A: Any Development Project that retails merchandise, generally without transformation, and renders…
Q: You own a coal mining company and are considering opening a new mine. The mine will cost $115.9…
A: Given Cost of project is $115.9 million Cashflows $20.1 million Cost of capital is 8.2%
Q: Juniper Corporation is considering two alternative investment proposals with the following data:…
A: Accounting rate of return (%) =( Average annual profit/initial investment) ×100
Q: nterpreting beta A firm wishes to assess the impact of changes in the market return on annasset that…
A: In finance beta is a measure of volatility or systematic risk. Beta shows the volatility of returns…
Q: You have an opportunity to invest $50,600 now in return for $60,800 in one year. If your cost of…
A: Net Present Value(NPV) is one of the modern techniques of capital budgeting which considers the time…
Q: main participants
A: Real estate refers to the business of buying, selling or renting the land, building, etc and it's…
Q: Value of a retirement annuity. Your bank manager has informed you about a new investment plan that…
A: Annual payment (P) = $5000 Interest rate (R) = 6% Number of annual payment (N) = 20
Q: Current Attempt in Progress Two investments involving a virtual mold apparatus for producing dental…
A: Investment decisions Investing decisions are frequently aided by decision-making tools. The…
Q: iquidation based valuation Tang mining is considering the acquisition of Zang Mining at a cash…
A: Net value of the assets is the remaining value left after all liabilities.
Q: If ₱17,000 is deposited at the end of each year for 16 years in a bank that give 7% interest per…
A: Future Value: The future value is the amount that will be received at the end of a certain period.…
Q: Robinson Co. is interested in purchasing a new delivery vehicle so it can become a subcontractor…
A: Investment Appraisal: It is a process a business attempts to assess likely significant activities…
Q: The following table lists prices of Amazon options in January 2018 when Amazon stock was selling for…
A: Stock represents the ownership right in the company. Owners of the company can get dividend if…
Q: If Macaulay duration is equivalent to 4 while YTM is at 6%, what would be the percentage change in…
A: Here, Macaulay Duration is $ YTM is 6% Interest changes from 5% to 5.75%
Q: You would like to have $53,000 in 13 years. To accumulate this amount, you plan to deposit an…
A: Amount to accumulate is $53,000 Interest rate is 6% Time period is 13 years To Find:- Annual…
Q: Please explain if a company has already taken too much debt (exceeded the amount that they can…
A: A leveraged buyout happens when a business acquires another company nearly completely using borrowed…
Q: You decide to make monthly payments into a retirement fund earning 4.75% compounded monthly. Note:…
A: Since you have asked a question with multiple questions, we will solve the first one for you. If you…
Q: the real risk-free rate is 3.50% and the future rate of inflation is expected to be constant at…
A: The below answer is given by two methods , but the appropriate is fist method which is simple rate…
Q: Calvin Johnson has a $4,500 debt balance on his Visa card that charges 13.3 percent APR compounded…
A: Here, Debt Amount of Credit Card is $4,500 APR is 13.3% Compounding Period (m) is Monthly i.e 12…
Q: Over the past few years, Microsoft founder Bill Gates' net worth has fluctuated between $20…
A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: The Everly Equipment Company's flange-lipping machine was purchased 5 years ago for $40,000. It had…
A: Net present value is the difference between the present value of cash inflows and present value of…
Q: You may use your financial calculator or excel for calculations but be sure to show your work (i.e.…
A: Part 1: Future Value = $400,000 Rate = 2% Time period = 18 months - 12 months = 6 months Present…
Q: What is its YTC?
A: Yield to call (YTC) refers to the return earned or received by the bondholders on the bonds held by…
Q: Which of the following is NOT relevant to the evaluation of a proposed project? Incremental cash…
A: While eveluating a project all the initial cash flows and subsequent cash flows are considered. All…
Q: What does indifference point mean in EBIT-EPS analysis? Select one: O a. The point of indifference…
A: (Part 1) Given, Meaning of EBIT-EPS analysis:- It considers the financial leverage on the EPS with…
Q: Pompeii's Pizza has a delivery car that it uses for pizza deliveries. The transmission needs to be…
A: Present Car New Car Purchase cost new $32,000.00 Transmission and other repairs $…
Q: 3. For the last 15 years, Tina has been receiving a 20/15/5 series discount. Find the equivalent…
A: In finance a discount series is essentially a chain of discounts. Here multiple discounts are…
Q: The Aberdeen Fixed Rate Pund pays a dividend of 10% per year simple interest. If you invest $240,000…
A: Principal Amount $ 2,40,000.00 Rate of Interest 10% Time Period 3
Q: Given the following data, what should the price of the stock be? Required return: 10% Present…
A: Where,P0 = Stock value D0 = Current dividend g = growth rate in decimal format D0 ( 1 + g)…
Q: 3. At what rate compounded semiannually will Php9,700 accumulates to Php25,000 in 4 years and 9…
A: Compounding is a technique to compute the future value (FV) of the present amount after a specific…
Q: Explain the definition of financial value.
A: Standard Disclaimers“Since you have asked multiple question, we will solve the first question for…
Q: In a congressional district somewhere in the U.S., a new representative is being elected. The voters…
A: Market supply and demand are in equilibrium, and pricing are stable as a result. In general, if…
Q: On April 1, 1998, John opened a savings account with a nominal interest rate of 3.4% payable monthly…
A: Quaterly deposit in investment fund is $400 Interest rate of quaterly fund is 4.6% payable quaterly…
Q: A risky security has less risk than the overall market. What must the beta of this security be? O 0…
A: The beta of the overall market is 1.00. Since the security has lesser risk than the overall market,…
Q: Principal Rate Time Interest Maturity Value PHP 60,000 4% 3.5 уrs 2.2% 5 yrs PHP 345 PHP 125,000 2%…
A: The formula for simple interest is: Simple interest=Principal×time×rate100…
Q: and Lana take a 30-vear home mortgage of $126,000 at 7.5%, compounded monthly. They make their…
A: Mortgage Amount = $126,000 Time Period = 30 Years Interest Rate = 7.5%
Q: how can you distinguish between simple and compound interest? 2. If you were given a chance to…
A: Interest can be defined as the value of money over a period of time. It is charged by lenders to…
Q: what amount must you pay if you pay within the discount period?
A: Credit term refers to a method used by the firms to encourage buyer or debtor to pay the amount of…
Q: A borrower takes out a 30-year loan for a house worth $250,000. If the annual interest rate is 6%.…
A: Current value of loan (PV) = $250,000 Interest rate (r) = 6% Period for future value (t) = 12 Years…
Q: Common stock value-Constant growth Personal Finance Problem Over the past 6 years, Elk County…
A: To Find:- Value of share price in 2022
Q: An investor who owns a interest rate swap pay six-month LIBOR and receive 2.38% (semi-annual…
A: Here, Notional Principal is 99 million Euro Receive six month LIBOR of 2.38% with semi annual…
Q: What is your monthly payment if you choose 0% financing for 48 months? $ .…
A: Mortgage amortization refers to a schedule which is prepared to shows the periodic loan payments,…
Q: ayzee will inherit a big amount of money from his parents and he is planning to invest a oig portion…
A: When there are different possible states of nature, the expected pay off will be the weighted…
Q: If you make monthly payments of $527.00 into an ordinary annuity earning an annual have in the…
A: As there is more compounding the more interest is being accumulated and more is future value of…
Q: while the material quantity van materials purchased in June wa
A: Material price variance = -7000 SP*AQ-AP*AQ=-7000 SQ*SP-AQ*SP=4200 SP*SQ-AP*AQ=4200-7000=-2800…
Q: Both call and put options are affected by the following five factors: the exercise price, the…
A: Put Option:- It is an financial instrument that gives right to sell but not the obligation to sell…
Q: FCOJ, Inc., a prominent consumer products firm, is debating whether or not to convert its all-equity…
A:
Q: What is the share price of the company's stock? (Do not round intermediate calculations and round…
A: Share Price: It represents the current value to the sellers and buyers which is dictated by demand…
Q: Name: Use the annuity formula, A-Px- to solve the following problem. 5) Billy deposits money on a…
A: a) Bi- Monthly Deposit: Solved using Financial Calculator FV = 12,200 I/Y = 2.5/6 = 0.4166666667 N…
Kareem received a retroactive salary payment of $100,000 and has decided to invest the full amount in Make Some Money Limited stock. In an effort to maximize his returns, he has decided to utilize the available 40% margin. MSM stock is currently trading at $25 and regulators require that investors maintain a margin of at least 20%.
a. Deterimine Kareem's debit balance for this investment.
b. How many units of the stock can Kareem buy?
c. How many can the stock price fall before Kareem receives a margin call?
d. Calculate Kareem's Holding period return if he sells the stock for $30 in six months. Assume that no dividends were received.
e. Should all investors conduct margin transaction? Explain
Step by step
Solved in 2 steps
- Lancaster Corporation, an investment banking company, often has extra cash to invest. Suppose Lancaster buys500 shares of Knight Corporation stock at $40 per share, representing less than 5% of Knight’soutstanding stock. Lancaster expects to hold the Knight stock for one month and then sell it.The purchase occurs on December 15, 2018. On December 31, the market price of one share ofKnight stock is $47 per share.Requirements1. What type of investment is this for Lancaster? Give the reason for your answer.2. Record Lancaster’s purchase of the Knight stock on December 15 and the adjustment tomarket value on December 31.3. Show how Lancaster would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018Given that Local Care, Inc.'s stock is currently selling for $65 a share, calculate the amount of money that Elijah Pearson will make (or lose) on each of the following transactions. Assume that all transactions involve 100 shares of stock, and ignore brokerage commissions. Input all answers as positive values. He short-sells the stock and then repurchases the borrowed shares at $85.Total of $ . He buys the stock and then sells it some time later at $85.Total of $ . He short-sells the stock and then repurchases the borrowed shares at $50.Total of $ .Amherst Corporation, an investment banking company, often has extra cash to invest. Suppose Amherst buys900 shares of Hurricane Corporation stock at $57 per share, representing less than 5% ofHurricane’s outstanding stock. Amherst expects to hold the Hurricane stock for one month andthen sell it. The purchase occurs on December 15, 2018. On December 31, the market price of ashare of Hurricane stock is $58 per share.Requirements1. What type of investment is this for Amherst? Give the reason for your answer.2. Record Amherst’s purchase of the Hurricane stock on December 15 and the adjustment tomarket value on December 31.3. Show how Amherst would report this investment on its balance sheet at December 31 andany gain or loss on its income statement for the year ended December 31, 2018.
- You are considering buying stock of a particular company. Your plan is to buy the stock today, receive dividend payments exactly one year from now, receive dividend payments again exactly two years from now, and immediately after receiving dividends in the second year, you would sell the stock. You paid a professional to perform fundamental analysis on the company, and you receive the following information based on that analysis: 1. expected dividend payment for one share one year from now: $21 2. expected dividend payment for one share two years from now: $34 3. expected sale price of one share of stock two years from now: $340 You may assume there is no inflation. If the prevailing interest rate is 7%, at what price would you consider a share of this company to be fairly valued today? (If necessary, round your answer to the nearest integer)Shakee Venture wants to purchase 1,000 shares of an Internet technologystock for $15 a share. She figures that she needs $15,000 plus $90 brokeragecommission to purchase the stock. She currently has $8,000 of liquidity inher money market account.a. What can Shakee borrow on margin in order to make the transaction?b. If the stock jumps to $50 per share within a week, how much will Shakeerealize in profit after paying her broker?c. If the stock dropped to $5 per share, rather than increasing to $50,and the broker put in the margin call, how much must Shakee pay thebroker?d. Based on beginning account balance of $8,000, what is Shakee’s loss?solve in excel if possible! Need both answers The owner of Gator Airlines wishes to take her stock public for the first time by selling 3 million shares. The underwriter determines that the true value will be $15 with probability .4 and $8 with probability .6. There are a group of uninformed investors who are willing to order 6 million shares as long they pay no more than the expected true value. They also assess the probability of the true value of the shares being $15 with probability .4 and $8 with probability .6. There is a group of informed investors who always know whether the true value is $15 or $8. They are willing to order 2 million shares if the offer price is less than the true value. . 1) Calculate the highest offer price at which the entire issue will always sell. 2) Is the new issue price below the expected true value of the shares? If so, could an uniformed investor make money on average by submitting an order to buy some shares of the new issue? Why or why not
- A speculator sells a stock short for $71 a share. The company pays a $2.50 annual cash dividend.After a year has passed, the seller covers the short position at $63. If the margin requirement is55 percent, what is the percentage return earned on the investment? Redo the calculations, assuming the price of the stock is $78 when the investor closes theposition. Based on your calculations to both scenarios, what generalization can be inferred?An investor sells a stock short for $97 a share. The company pays a $4.70 annual cash dividend. After a year has passed, the seller covers the short position at $85. If the margin requirement is 57 percent, what is the percentage return earned on the investment?Redo the calculations, assuming the price of the stock is $103 when the investor closes the position.Based on your calculations to both scenarios, what generalization can be inferred?Lahhey Publishing wishes to estimate the value of its outstanding preferred stock. The preferred stock has a RM50 par value and pays an annual dividend of RM7.50 per share and currently earning an 8% annual rate of return. (i) Calculate the market value of the outstanding preferred stock. (ii) If an investor purchases the preferred stock at the value calculated in part (a), how much does she gain or lose per share if she sells the stock when the required return on preferred stock has fallen to 6%. Explain.
- A manager buys three shares of stock today, and then sells one of those shares each year for the next 3 years. His actions and the price history of the stock are summarized below. The stock pays no dividends. Time Price Action 0 $ 150 Buy 3 shares 1 180 Sell 1 share 2 180 Sell 1 share 3 180 Sell 1 share Required: a. Calculate the time-weighted geometric average return on this portfolio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Calculate the time-weighted arithmetic average return on this portfolio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Calculate the dollar-weighted average return on this portfolio. (Do not round intermediate calculations. Round your answer to 2 decimal places.)A manager buys three shares of stock today, and then sells one of those shares each year for the next 3 years. His actions and the price history of the stock are summarized below. The stock pays no dividends. Time Price Action 0 $ 120 Buy 3 shares 1 150 Sell 1 share 2 150 Sell 1 share 3 150 Sell 1 share a. Calculate the time-weighted geometric average return on this “portfolio.” (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Calculate the time-weighted arithmetic average return on this portfolio. (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. Calculate the dollar-weighted average return on this portfolio. (Do not round intermediate calculations. Round your answer to 2 decimal places.)Jason Momoa put up $18,000 to take a long position in XYZ stock with a price of $30. a) If the initial margin rate on the position is 60%, how many shares can you purchase? b) What dollar amount are you borrowing from the brokerage firm? Include working