Investment

Calculating Dee’s margin

a. The stock is purchased for: 300 shares x $40 = $12,000
The amount borrowed from broker = $4,000.
Investors’ margin = $12000 - $8000 = $8000
Therefore, the investor puts up equity, or margin, of $8,000.

Calculating remaining margin

b. If the share price falls to $30, then the value of the stock falls to $9,000.
By the end of the year, the amount of the loan owed to the broker grows to: Principal x (1 + Interest rate)= $4,000 x 1.08 = $4,320
Therefore, the remaining margin in the investor’s account is: Margin on Long position = Equity in account / Value of Stock
= $9,000 - $4,320 = $4,680
The percentage margin is now: $4,680/$9,000 = 0.52 = 52%
Therefore, the investor will not receive a margin call.

Calculating the rate of return

c. The rate of return on the investment over the year is:
(Ending equity in the account - Initial equity)/Initial equity
= ($4,680 - $8,000)/$8,000 = - 0.415= - 41.5%

149.	An open-end fund has a net asset value of $10.70 per share. It is sold with a front-end load of 6%. What is the offering price? Offering price=NAV/(1-load) NAV=$10.70 Load=6% Offering Price= 10,70/(1-0.06)=$11.38
150.	You purchased 1,000 shares of the New Fund at a price of $20 per share at the beginning of the year. You paid a front-end load of 4%. The securities in which the fund invests increase in value by 12% during the year. The fund’s expense ratio is 1.2%. What is your rate of return on the fund if you sell your shares at the end of the year? 1000 x $20= $20,000/(1-.04)= 20,833.33~> Shares increase from $20,000 to... $20,000(1.12-.012)= $22,160~> Rate of Return= (22,160-20,833.33)/20,833.33= 0.0637== 6.37% 6.37%
151.	A coupon bond paying semiannual interest is reported as having an ask price of 117% of its $1,000 par value. If the last interest payment was made one month ago and the coupon rate is 6%, what is the invoice price of the bond?