Class Notes (836,960)
Canada (509,983)
Business (3,287)
BU111 (655)
Lecture

f11 bu111 updated Additional Margin Buying Problems.docx
Premium

3 Pages
76 Views
Unlock Document

Department
Business
Course
BU111
Professor
Laura Allan
Semester
Fall

Description
Updated Additional Margin Buying Problems Utilize a 2% commission IN (purchase commission) and a 2% commission OUT (sale commission) for all transactions. 1. You are bullish about WMX and instruct your broker to buy as many WMX shares as possible utilizing the full margin. She informs you that your margin requirements are 60%. WMX is currently trading at $20/share and you have $2,400 available to invest. If you sell your shares at a stock price of WMX rises to $28/share, what will be the amount of your capital gain and what yield would you realize? 2. You receive a hot stock tip about LBD and believe it will rise in value. You have $3,200 available to invest and your broker has approved you for a 50% margin requirement. You instruct your broker to buy as many shares as possible using the full margin. LBD is trading at $8/share today. a) How many shares can you purchase by using the full margin available? b) What would your capital gain and yield be if LBD rose to $17/share and you sold at that price? 3. Your fellow classmate was so persuasive in his investment presentation that you’ve decided to buy as many RIM shares as you can. You are approved for a margin account with a 70% margin requirement. You have $1,400 available to invest and RIM is currently trading at $20/share. To your delight, your brilliant classmate was right and RIM stock rises to $35/share. What is your capital gain and yield? Solutions 1. Let total amount invested be ‘x’, Marg
More Less

Related notes for BU111

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit