Compute the annualized rate of return on this investment if you had paid cash, and your rate of return with the margin purchase.
Investment Analysis and Portfolio Management (9th ed.)
. FINANCE major. Book from: Frank K. Reilly, & Keith C.
Brown, (2009). Mason, OH: South-Western/ Cengage Learning. Book
used by Strayer University.
3. Suppose you buy a round lot of Francesca Industries stock on 55
percent margin when the stock is selling at $20 a share. The broker
charges a 10 percent annual interest rate, and commissions are 3
percent of the stock value on the purchase and sale. A year later,
you receive a $0.50 per share dividend and sell the stock for 27.
What is your rate of return on Francesca Industries?
5. You own 200 shares of Shamrock Enterprises that you bought at
$25 a share. The stock is now selling for $45 a share.
a. You put in a stop loss order at $40. Discuss your reasoning for
b. If the stock eventually declines in price to $30 a share, what
would be your rate of return with and without the stop loss
6. Two years ago, you bought 300 shares of Kayleigh Milk Co. for
$30 a share with a margin of 60 percent.
Currently, the Kayleigh stock is selling for $45 a share. Assuming
no dividends and ignoring commissions, compute (a) the
annualized rate of return on this investment if you had paid cash,
and (b) your rate of return with the margin purchase.BUS 401 FINANCE WEEK 1 DQ2
3-2. (Computing cash flows) Given the
following information, prepare a statement of cash flows. (table
from book follows in actual document)
4-5. (Ratio analysis) The Mitchem
Marble Company has a target current ratio of 2.0 but has
experienced some difficulties financing its expanding sales in the
past few months. At present the firm has a current ratio of 2.5 and
current assets of $2.5 million. If Mitchem expands its receivables
and inventories using its short-term line of credit, how much
additional short-term funding can it borrow before its current
ratio standard is reached?
Tutorial shows all statement values, calculation
formulas and results with book reference.