6.Lynne Hampton purchased 100 shares of $75 stock on margin. The margin requirement set by the Federal Reserve Board was 40 percent, but Hampton’s brokerage firm requires a total margin of 50 percent. Currently the stock is selling at $62 per share. What is Hampton’s return on investment before commission and interest if she sells the stock now?

A)   -17%.

B)   -35%.

C)   -40%.

D)   -60%.

7.Mark Ritchie purchased, on margin, 200 shares of TMX Corp. stock at a price of $35 per share. The margin requirement was 50%. The stock price has increased to $42 per share. What is Ritchie’s return on investment before commissions and interest if he decides to sell his TMX holdings now?

A)   40%.

B)   10%.

C)   20%.

D)   30%.

8.An investor buys 200 shares of ABC at the market price of $100 on full margin. The initial margin requirement is 40 percent and the maintenance margin requirement is 25 percent.

If the shares of stock later sold for $200 per share, what is the rate of return on the margin transaction?

A)   250%.

B)   100%.

C)   200%.

D)   400%.

9.If you buy 100 shares of a $50 stock on margin when the initial margin requirement is 40 percent, how much money must you borrow from your broker?

A)   $2,000.

B)   $4,000.

C)   $3,000.

D)   $5,000.

10.Becky Kirk contacted her broker and placed an order to purchase 1,000 shares of Bricko Corp. stock at a price of $60 per share. Kirk wishes to buy on margin. Assuming the margin requirement is 40 percent, how much money does Kirk have to pay up front to make the purchase?

A)   $36,000.

B)   $24,000.

C)   $0.

D)   $60,000.

答案和详解如下：

6.Lynne Hampton purchased 100 shares of $75 stock on margin. The margin requirement set by the Federal Reserve Board was 40 percent, but Hampton’s brokerage firm requires a total margin of 50 percent. Currently the stock is selling at $62 per share. What is Hampton’s return on investment before commission and interest if she sells the stock now?

A)   -17%.

B)   -35%.

C)   -40%.

D)   -60%.

The correct answer was B)

Hampton originally purchased 100 shares at $75 for a total value of $7500. Half of the value ($3750) was borrowed and Hampton paid cash for the other half. The current total market value of the stock is $6200. If Hampton sells her holdings she will have $2450 left after she pays off the loan. Hampton’s return on her original investment is:

$2450/3750 – 1 = 0.65 – 1 = -0.35 = -35%.

7.Mark Ritchie purchased, on margin, 200 shares of TMX Corp. stock at a price of $35 per share. The margin requirement was 50%. The stock price has increased to $42 per share. What is Ritchie’s return on investment before commissions and interest if he decides to sell his TMX holdings now?

A)   40%.

B)   10%.

C)   20%.

D)   30%.

The correct answer was A)

200 shares x $35 = $7000 Initial Market Value

$7000 x .50 = $3500 cash payment and $3500 borrowed.

The new market value of the stock after price increase is (200 x $42) = $8400. If Ritchie sold his holdings he would have $4900 ($8400 - $3500) left after the loan was paid. So Ritchie’s return on his original $3500 investment is:

$4900/3500 – 1 = 1.4 – 1.0 = 0.40 = 40%.

8.An investor buys 200 shares of ABC at the market price of $100 on full margin. The initial margin requirement is 40 percent and the maintenance margin requirement is 25 percent.

If the shares of stock later sold for $200 per share, what is the rate of return on the margin transaction?

A)   250%.

B)   100%.

C)   200%.

D)   400%.

The correct answer was A)

One quick (and less than intensive) way to calculate the answer to this on the examination (and it is very important to save time on the examination) is to first calculate the return if all cash, then calculate the margin leverage factor and then finally, multiply the leverage factor times the all cash return to obtain the margin return.

Calculations:

Step 1: Calculate All Cash Return:

        Cash Return % = [(Ending Value / Beginning Equity Position) – 1] * 100

        = [(($200 * 200) / ($100 * 200)) – 1] * 100 = 100%

Step 2: Calculate Leverage Factor:

        Leverage Factor = 1 / Initial Margin % = 1 / 0.40 = 2.50

Step 3: Calculate Margin Return:

        Margin Transaction Return = All cash return * Leverage Factor = 100% * 2.50 = 250%

        Note: You can verify the margin return as follows:

        Margin Return % = [((Ending Value - Loan Payoff) / Beginning Equity Position) – 1] * 100

        = [(([$200 * 200] – [$100 * 200 * 0.60]) / ($100 * 0.40 * 200)) – 1] * 100

        = [ ((40,000 - 12,000) / 8,000) -1] * 100 = 250%

9.If you buy 100 shares of a $50 stock on margin when the initial margin requirement is 40 percent, how much money must you borrow from your broker?

A)   $2,000.

B)   $4,000.

C)   $3,000.

D)   $5,000.

The correct answer was C)

An initial margin requirement of 40% would mean that the investor must put up 40% of the funds and brokerage firm may lend the 60% balance. Therefore, for this example (100 shares) * ($50) = $5,000 total cost. $5,000 * 0.60 = $3,000.

10.Becky Kirk contacted her broker and placed an order to purchase 1,000 shares of Bricko Corp. stock at a price of $60 per share. Kirk wishes to buy on margin. Assuming the margin requirement is 40 percent, how much money does Kirk have to pay up front to make the purchase?

A)   $36,000.

B)   $24,000.

C)   $0.

D)   $60,000.

The correct answer was B)

The margin requirement represents the amount of money an investor must put down on the purchase. So Kirk must put $24,000 down ($60,000 x .40 = $24,000) and can borrow the balance.