An investor opens her first brokerage account and purchases, Ask an Expert

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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?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91725726

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