You buy 200 shares of ATT stock at $50 per share with 50% margin. At what price per share would you get a margin call if the maintenance margin is 30%?
You are considering investing in one of two well-diversified portfolios. Portfolio A has an expected return of 8% and a beta of 1.35 while Portfolio B has an expected return of 6% and a beta of 0.80.
Assuming that you are a rational risk-averse investor and the risk-free rate is 2%, which of the two portfolios should you choose and why?
A.Portfolio A because it has a higher risk premium
.B.Portfolio B because it has less market risk.
C.Portfolio B because it has a higher reward-to-risk ratio.
D.Portfolio A because it offers a greater reward per unit of risk.
You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker at an interest rate of 8% per year and invest $10,000 in the stock.(LO 3-4)
What will be your rate of return if the price of Telecom stock goes up by 10% during the next year? (Ignore the expected dividend.)the answer is 12%. please explain step by step how to reach this answer.
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