Let p be the price of a stock the investor wants to, Ask an Expert

Economics

Let P be the price of a stock. The investor wants to purchase Q units of this stock. Suppose investor’s equity is E and assume that equity is strictly smaller than the value of the stock investor wants to purchase. As such, the investor receives a loan, L from the broker.

A. Give a formula that expresses E in terms of L, P and Q.

B. Give a formula that expresses the margin M in terms of L, P, and Q.

C. After the loan was made, suppose the price of the stock falls to λP, where 0 < λ < 1. Find the new margin, in terms of M and λ.

D. Now let the maintenance margin be c, where 0 < c < 1. Find the largest λ, call it λ ∗ , such that, given our initial margin M and maintenance margin c, whenever λ > λ∗ the broker will not issue a margin call.

View complete question

Business Economics, Economics

Category:- Business Economics
Reference No.:- M91524170

Have any Question?Write your Review or question?

Related Questions in Business Economics

A company has two divisions the first produces an

A company has two divisions. The first produces an operating system for smartphones. The other division manufacturers and markets its own smartphone. Of course, the company's smartphone runs on its own operating system. ...

Discuss three ranges of the aggregate supply curve explain

Discuss three ranges of the aggregate supply curve. Explain changes in the AD-AS macroeconomic equilibrium due to the aggregate demand shifts and due to aggregate supply shifts. Apply the AD-AS model to the two types of ...

For a population of individuals that has a standard

For a population of individuals that has a standard deviation of 10, what is the standard error of the mean for samples of size (a) 2, (b) 3, (c) 4, (d) 5, (e) 10, (f) 20, (g) 100?

The mean distance commuters drove to work each day was

The mean distance commuters drove to work each day was estimated to be 40.8 miles from a sample of 45 commuters. The sample standard deviation was 5.8 miles. Assume that the distance commuters drive to work each day are ...

From a consequentialist perspective that has as its

From a consequentialist perspective that has as its objective improving the standard of living of unskilled workers, is the introduction of a minimum wage ethically justified?

In an inquiry into the nature and causes of the wealth of

In an inquiry into the nature and causes of the wealth of nations, Adam Smith listed three reasons for productivity to increase with specialization. What are these three reasons?

Suppose the lifetime of a particular appliance follows an

suppose the lifetime of a particular appliance follows an exponential distribution with a mean of 10 years. what is the probability that the appliance will fail in more than 5 years?

One of the authors received a credit card bill for 3167 and

One of the authors received a credit card bill for 3167 and it included a charge of 1622 that was not valid. Find the values of the absolute amd relative errors.

Bullwhy hasnt health care in australia been entirely

• Why hasn't health care in Australia been entirely privatised, according to Boxall and Gillespie? • Should health care (in Australia) be wholly privatised? Do you think it will be in the future?

Suppose demand and supply are given byqdxnbsp 14 - 05

Suppose demand and supply are given by: Q d x = 14 - 0.5 P x and Q s x = .25 P x - 1 a) Determine the equilibrium price and quantitiy. b) Suppose a $12 excise tax is imposed on the good. Determine the new equilibrium ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Business Economics Expert