1. Assume that an investor buys 100shares of stock at RM 50.00, putting up a 60% margin.
a. What is the debit balance in this transaction?
b. How much equity capital must the investor ‘s new margin position
2. Assume that an investor buys 100 shares of stock at RM 50.00 per share, putting up a 70% margin. a. What is the debit balance in this transaction? b. How much equity funds must the investor provide to make this margin transaction? c. If the stock rises to RM 80.00 per share, what is the investor margin position?
3. Miguel Torres purchased 100 shares of Can’t Win.com for RM50 per share, using as little of his own money as he could. His broker has a 50% initial margin requirement. The price of the stock falls to RM30 per share. What does Miguel need to do?
4. An investor buys 200 shares of stock selling at $ 80 per share using a margin of 60%. The stock pays annual dividends $ 1 per share. A margin loan can be obtained at an annual interest cost of 8%. Determine what return on invested capital the investor will realize if the price of the stock increases to $ 104 within six months. What is the annualized rate of return on this transaction?
5. Ah Beng purchased 3000 shares of Digi Communications Bhd. stock at RM 4.60 per share using the prevailing minimum initial margin of 65%. He held the stock for exactly 4 month and sold it without any brokerage cost at the end of the period. During the four month holding period, the stock paid RM 0.40 per share in cash dividends. Ah Beng was charged 6% annually interest on margin loan. The minimum maintenance margin was 40%.
a. Calculate the initial value of the transaction, the debit balance, and the equity position on Ah Beng’s transaction. b. For each share prices stated below, calculate the actual margin percentage and indicate whether Ah Beng account would have excess equity, or would be subject to margin call?
I. RM 4.00
II. RM 5.50
III. RM 6.50
IV. RM 3.30
V. RM 4.55
c. Calculate the
I. Amount of dividend received during the 4 months holding period II. Amount of interest received during the 4 months holding period d. Use each of the following sale price at the end of 4 month holding period to calculate Ah Beng HPR return on Digi Communication Bhd. share transaction.
I. RM 5.00
II. RM 7.00
III. RM 4.80