Finance Chapter 2 3 Freda purchased 500 shares of stock on margin at a price

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75) Eight months ago, Freda purchased 500 shares of stock on margin at a price per share of $35.

The initial margin requirement on her account is 70 percent and the maintenance margin is 40

percent. The call money rate is 4.75 percent and she pays 2 percent above that rate. Today, she

sold these shares for $37.50 each. What is her annualized rate of return?

A) 8.50 percent

B) 10.61 percent

C) 12.70 percent

D) 14.90 percent

E) 16.42 percent

76) Three months ago, Trevor purchased 500 shares of stock at a cost per share of $64.20. The

purchase was made on margin with an initial margin requirement of 65 percent. Trevor pays 1.6

percent over the call money rate of 4.8 percent. What will his total dollar return be on this

investment if he sells his shares today at a price per share of $63.40? Ignore dividends.

A) -$548.60

B) -$539.67

C) -$534.95

D) -$575.60

E) -$591.19

77) Robin sold 800 shares of a non-dividend paying stock this morning for a total of $29,440.

She had purchased these shares on margin nine months ago at a cost per share of $35. The initial

margin requirement on this stock is 60 percent and the maintenance margin is 30 percent. Robin

pays 1.2 percent over the call money rate of 4.9 percent. What is her total dollar return on this

investment?

A) $816.48

B) $897.29

C) $931.41

D) $1,164.93

E) $1,440.00

78) You recently purchased 200 shares of stock at a cost per share of $32.50. The initial margin

requirement on this stock is 75 percent and the maintenance margin is 50 percent. The stock is

currently valued at $35.00 a share. What is your current margin position? Ignore margin interest.

A) 73.01 percent

B) 73.83 percent

C) 74.95 percent

D) 75.69 percent

E) 76.79 percent

79) You recently purchased 1,300 shares of stock at a cost per share of $54.10. The initial margin

requirement on this stock is 60 percent and the maintenance margin is 30 percent. The stock is

currently valued at $42.30 a share. What is your current margin position? Ignore margin interest.

A) 46.91 percent

B) 48.84 percent

C) 63.05 percent

D) 65.28 percent

E) 78.18 percent

80) Yvette recently purchased 500 shares of stock at a cost per share of $43.50. The initial

margin requirement on this stock is 75 percent and the maintenance margin is 40 percent. The

stock is currently valued at $44.75 a share. What is her current margin position? Ignore margin

interest.

A) 74.29 percent

B) 74.78 percent

C) 75.70 percent

D) 76.03 percent

E) 76.14 percent

81) You short sold 700 shares of a stock at $25 a share. The initial margin requirement is 75

percent and the maintenance margin is 35 percent. What is the amount of your total liability for

this transaction as initially shown on your account balance sheet?

A) $8,640

B) $17,500

C) $22,210

D) $28,800

E) $37,440

82) Elizabeth short sold 400 shares of stock at $72 a share. One month later, she covered the

short at a price of $68. What was her total dollar return on this investment?

A) -$2,400

B) -$1,800

C) -$920

D) $1,600

E) $2,200

83) Today, you short sold 1,100 shares of Jasper Industrial stock at $48 a share. The initial

margin is 60 percent and the maintenance margin is 30 percent. Which one of the following is

correct concerning your account balance sheet for this transaction?

A) You have an asset of $31,680 from the sale proceeds.

B) You have a liability from the short position of $21,120.

C) Your account equity is $21,120.

D) Your initial margin deposit is $15,840.

E) Your total assets are $84,480.

84) Mark short sold 500 shares of stock at $12.50 a share. The initial margin is 80 percent and

the maintenance margin is 50 percent. The stock is currently selling for $9.80 a share. What is

Matt’s account equity at this time? Ignore margin interest.

A) $2,070

B) $4,590

C) $6,350

D) $8,950

E) $10,510

85) You short sold 500 shares of Jasper stock at $41 a share at an initial margin of 60 percent.

What is the highest the stock price can go before you receive a margin call if the maintenance

margin is 40 percent?

A) $46.86

B) $47.08

C) $55.50

D) $56.90

E) $57.40

86) Jennifer believes that Northern Wine stock is going to decline in value so she is short selling

1,000 shares at $32 a share. Her initial margin requirement is 70 percent and the maintenance

margin is 30 percent. What is the highest the stock price can go before she receives a margin

call?

A) $38.97

B) $40.15

C) $41.85

D) $43.75

E) $45.77

87) Mike short sold 400 shares of DeSoto Lumber stock at $22 a share at an initial margin of 70

percent. The maintenance margin is 35 percent. What is the highest the stock price can go before

he receives a margin call?

A) $24.12

B) $25.48

C) $26.22

D) $27.70

E) $28.16

88) The short interest on Blue Water Cruisers stock was 351,900 when the market opened this

morning. During the day, 288,500 shares were covered and 151,600 shares were sold short. What

was the short interest on this stock at the end of the trading day?

A) 203,100 shares

B) 215,000 shares

C) 233,100 shares

D) 308,100 shares

E) 447,900 shares

89) You just sold 1,200 shares of stock short at a price per share of $13.50. The initial margin

requirement is 60 percent and the maintenance margin is 30 percent. What is your initial equity

position?

A) $6,480

B) $7,520

C) $9,720

D) $10,520

E) $16,200

90) Last week, you sold 300 shares of ABC stock for $6,300. The sale was a short sale with an

initial margin requirement of 70 percent. The maintenance margin is 40 percent. Some positive

news concerning the company was released last night and the stock price jumped this morning to

$28 a share. What is your current margin position in this stock?

A) 61.33 percent

B) 56.67 percent

C) 48.33 percent

D) 38.68 percent

E) 27.50 percent

91) Recently, you sold 1,000 shares of stock for $21,400. The sale was a short sale with an initial

margin requirement of 60 percent. The maintenance margin is 30 percent. The stock is currently

trading at $27.50 a share. What is your current margin position in this stock?

A) 24.51 percent

B) 28.11 percent

C) 32.09 percent

D) 43.98 percent

E) 46.69 percent

92) Recently, you sold 500 shares of stock for $16.60 a share. The sale was a short sale with an

initial margin requirement of 70 percent. The maintenance margin is 35 percent. The stock is

currently trading at $17.80 a share. What is your current short position in this stock?

A) $4,916

B) $6,830

C) $8,900

D) $10,362

E) $11,976

93) Neshoba Industries stock is selling for $33 a share. You would like to purchase as many

shares of this stock as you can. Your margin account currently has available cash of $7,000 and

the initial margin requirement is 65 percent. What is the maximum number of shares you can

buy?

A) 193 shares

B) 287 shares

C) 300 shares

D) 326 shares

E) 408 shares

94) Sam is purchasing 800 shares of RPT, Inc., stock at a price per share of $15.50. What is the

minimum amount the Federal Reserve will require Sam to pay in cash for this purchase?

A) $4,488

B) $6,200

C) $9,800

D) $10,968

E) $11,960

95) Louis purchased 300 shares of stock on margin for $22.15 a share and sold the shares eleven

months later for $24.50 a share. The initial margin requirement was 75 percent and the

maintenance margin was 30 percent. The interest rate on the margin loan was 8.5 percent. He

received no dividend income. What was his holding period return?

A) 7.05 percent

B) 8.45 percent

C) 9.88 percent

D) 10.76 percent

E) 11.56 percent

96) Marcia purchased 100 shares of Hyde Foods stock on margin at a price of $35 a share. The

initial margin requirement is 65 percent and the maintenance margin is 35 percent. What is the

lowest the stock price can go before Marcia receives a margin call?

A) $18.85

B) $24.50

C) $28.00

D) $30.00

E) $33.00

97) Sarah purchased 700 shares of Detroit Motors stock at a price of $45 a share. The initial

margin requirement is 70 percent and the maintenance margin is 30 percent. The effective

interest rate on the margin loan is 6.5 percent. How much margin interest will she pay if she

repays the loan in five months?

A) $187.29

B) $204.12

C) $217.29

D) $230.42

E) $251.25

98) You recently purchased 200 shares of stock at a cost per share of $22.25. The initial margin

requirement on this stock is 75 percent and the maintenance margin is 50 percent. The stock is

currently valued at $24.00 a share. What is your current margin position? Ignore margin interest.

A) 73.01 percent

B) 73.83 percent

C) 74.95 percent

D) 75.69 percent

E) 76.82 percent

99) Rylee short sold 600 shares of stock at $16.25 a share. The initial margin is 75 percent and

the maintenance margin is 50 percent. The stock is currently selling for $19.50 a share. What is

Rylee’s account equity at this time? Ignore margin interest.

A) $1,070.75

B) $3,590.25

C) $5,362.50

D) $8,950.00

E) $10,510.35

100) Last week, you sold 800 shares of Ace stock for $24,000. The sale was a short sale with an