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LOS g, (Part 1): Describe the process of buying a stock on margin, and compute the rate of return on a margin transaction.
Q1. Assume 100 shares purchased at $75/share with an initial margin of 50%.
The initial cost to the investor is:
A) $7,500.
B) $0.
C) $3,750.
Q2. Now, assume that the stock rose to $112.50. The return on investment to the investor is:
A) 50%.
B) 100%.
C) 200%.
Q3. Which of the following statements regarding margin accounts is most accurate?
A) The total equity in the margin account cannot fall below the initial margin requirement.
B) Margin accounts can be used to purchase securities by borrowing part of the purchase price.
C) Maintenance margin refers to the amount of funds the investor can borrow.
Q4. The initial margin is the:
A) equity represented in the margin account at any time.
B) amount of cash that an investor must maintain in his/her margin account.
C) minimum amount of funds that must be supplied when purchasing a security on margin.
Q5. 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%, how much money does Kirk have to pay up front to make the purchase?
A) $24,000.
B) $60,000.
C) $36,000.
Q6. If an investor buys 100 shares of a $50 stock on margin when the initial margin requirement is 40%, how much money must she borrow from her broker?
A) $2,000.
B) $4,000.
C) $3,000.
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发表于 2009-3-2 12:50
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