What are his initial equity and loan balances
Financial Management
1. Mr. Kim has just opened a margin account with a local brokerage firm. The firm has a policy of 60% initial margin and 40% maintenance margin. Mr. Kim initially buys 100 shares of a stock at $50 per share on margin.
a) What are his initial equity and loan balances?
b) To what price may the security decline before a margin call is required?
c) If the stock suddenly declines to @25 per share and the broker requires that the maintenance requirement be restored, how many shares must be sold to restore the maintenance margin?
2. You purchased 500 shares of the New Fund at a price of $25 per share at the beginning of the year. You paid a front-end load of 4%. The securities in whchi the fund invests increase in value by 13% during he year. The fund’s expenses ratio is 1.3%. Calculate
a) Initial investment
b) Dollar amount of the front-end load
c) Terminal value
d) Rate of return if you sell your shares at the end of the year?
