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Investment analysis and management

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solution


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CHAPTER 4 & CHAPTER 5 FIN640 Investment Analysis & Portfolio Management;Problem #2-4;Robert McAlister;2. Lauren has a margin account and deposits $50,000. Assume the prevailing margin requirement is 40%, commissions are ignored, and the Gentry Wine Corpration is selling at $35 per share.;a. How many shares can Lauren purchase using the maximum allowable margin?;b. What is Lauren's profit (loss) if the price of Gentry's stock;i. rises to $45?;ii. Falls to $25?;c. If the maintenance margin is 30%, to what price can Gentry Wine Fall before Lauren will receive a margin call?;3. Suppose you buy a round lot of Francesca Industries stock on 55% margin when the stock is selling a $20 a share. The broker charges a 10% annual interest rate, and commissions are 3% 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 a share. What is your rate of return on Francesca Industries?;4. You decide to sell short 100 shares of Charlotte Horse Farms when it is selling at its yearly high of $56. Your broker tells you that your margin requirement is 45% nd that the commission on the purchase is $155.;While you are short the stock, Charlotte pays a $2.50 per share dividend. At the end of one year, you buy 100 shares of Charlotte at $45 to close out your position and are charged a commission of $145 and 8% interest;on the money borrowed. What is your rate of return on the investment?;CHAPTER 4 & CHAPTER 5 FIN640 Investment Analysis & Portfolio Management;Problem #1;Robert McAlister;1. You are given the following information regarding prices for a sample of stocks;Stock;A;B;C;Number of Shares;1,000,000;10,000,000;30,000,000;Price;T;T+1;60;80;20;18;35;25;a. Construct a price-weighted index for these three stocks, and compute the percentage change in the index for the period from T to T + 1.;b. Construct a value-weighted index for these three stocks, and compute the percentage change in the index for the period from T to T+1;c. Compute the geometric mean of the percentage changes in Part b. Discuss how how this result compares to the answer in Part b.

 

Paper#17901 | Written in 18-Jul-2015

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