Investment Chapter - Importance of an Investment Policy Statement
Autor: Jannisthomas • October 31, 2017 • 980 Words (4 Pages) • 834 Views
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ROI is (6960-8000) / 24000 = -4.33%
Price decreases to $32
Assets
Liabilities and Account Equity
500 shares
$16000
Margin loan
$17040
Account equity
$-1040
Total
$16000
Total
$16000
ROI is (16000-24000) / 24000 = -33%
If simply purchased $8000 without margin, then spend $7968 to buy 166 shares with $48 per share.
If the price increases to $53 one year after, the ROI will be 53*166 – 7968 / 7968 = 10.42%
If the price remains $48, then ROI is 0 since there is no margin.
If the price decreases to $32, ROI should be 32*166-7968 / 7968 = -33.33%
#22
After selling the stock and gaining dividend, margin loan interest rate is 6%+1.25%=7.25%. Since you hold the stock for six months, so after six months, the margin maintenance should be 16600* (1+7.25%/2) = 17201.75. The selling price is $53, with a dividend of $0.25 per share, thus the value of 600 shares after six months should be $53.25*600=31950
Assets
Liabilities and Account Equity
600 shares
$31950
Margin loan
$17201.75
Account equity
$14748.25
Total
$31950
Total
$31950
Total dollar return = 0.25*600 + (14748.25-11000) = 150+3748.25=$3898.25
#25
One year before
Assets
Liabilities and Account Equity
750 shares
$72000
Margin loan
$43200
Account equity
$28800
Total
$72000
Total
$72000
One year late, covering short when the price hits $86.5
Assets
Liabilities and Account Equity
750 shares
$64875
Margin loan
$43200
Account equity
$21675
Total
$64875
Total
$64875
Short: (72000-64875) – (0.75*750*2) = 6000
ROI= (72000-64875-1125-72000)/72000 = -91.67%
#26
The original trade
Assets
Liabilities and Account Equity
600 shares
$43200
Margin loan
$21600
Account equity
$21600
Total
$43200
Total
$43200
Price of $63
Assets
Liabilities and Account Equity
600 shares
$37800
Margin loan
$21600
Account equity
$16200
Total
$37800
Total
$37800
Margin = 21600/ 37800 = 57.14%
Price of $77
Assets
Liabilities and Account Equity
600 shares
$46200
Margin loan
$21600
Account equity
$24600
Total
$46200
Total
$46200
Margin = 21600/ 46200 = 46.75%
Then calculate EAR at the price of $63
N=5, PV=- 43200, FV=37800 , PMT=0, thus I/Y= -2.63%
APR= -2.63% *12 = -31.62% thus EAR=(1-2.63%)12 -1= -27.37%
EAR at the price of $77
N=5,
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