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You are buying 100 shares of Netflix at the market price of $500 per share. You have $30,000 of your own money and borrows the rest of money for the purchase of the stock. The interest rate on the loan is 10%. Suppose your brokers initial margin requirement is 60% of the value of the position and maintenance margin is 30% of the value of the position. (Keep your answer to only two decimals) a. If the share price falls to $400 (20% drop) per share by the end of the year, what is the remaining margin in your account? (example of answer format: xx.xx%, such as 12.34%) b. What is the rate of
You are buying 100 shares of Netflix at the market price of $500 per share. You have $30,000 of your own money and borrows the rest of money for the purchase of the stock. The interest rate on the loan is 10%. Suppose your brokers initial margin requirement is 60% of the value of the position and maintenance margin is 30% of the value of the position. (Keep your answer to only two decimals) a. If the share price falls to $400 (20% drop) per share by the end of the year, what is the remaining margin in your account? (example of answer format: xx.xx%, such as 12.34%) b. What is the rate of return on your investment if the share price falls to $400 per share by the end of the year? (example of answer format: xx.xx%, such as 12.34%) c. Assume that a year has passed. How low can Netflixs price fall before you get a margin call? (example of answer format: $xxx.xx, such as $123.45) d. Assume that you shorted 100 shares at the market price of $500 per share and a year has passed. How high can Netflixs price go before you get a margin call? (example of answer format: $xxx.xx, such as $123.45)
