Question (Category: Business Finance , Business Accounting)
fin 550 hw week 2 Chapter 4 Problems 4, 5, 6, and 74) You decide to sell short 100 shares of Charlotte Horse Farms when it is selling as its yearly high of $56. Your broker tells you that your margin requirement is 45% and that the commission on the purchase is $155. While you are short the stock, Charlotte pays a $2.50 per share dividend. At the end of one year, you buy 100 shares of charlotte at $45 to close on your position and are charged a commission of $145 and 8% interest on the money borrowed. What is your rate of return on the investment?5) You own 200 shares of Shamrock Enterprises that you bought at $25 a share. The stock now is selling for $45 a share.6) Two years ago you bought 300 shares of Kayleigh Milk Co. for $30 with a margin of 60%. Currently the Kayleigh stock is selling for $45. Assuming no dividends and ignoring commission, compute (a) the annualized rate of return with the margin purchase.7) The stock of the Madison Travel Co. is selling for $28 a share. You put in a buy order at $24 for one month. During the month the price declines to $20, then Jumps to $36. Ignoring commissions what would have been your rate of return on this investment? What would be your rate of return if you had put in a market order? What if your limit order was at $18?Chapter 6 Problems 1, 2, 3, and 41)Considering the world economic outlook for the coming year and estimates of sales and earning for the pharmaceutical industry, you expect the rate of return for Lauren Labs common stock to range between -20% and 40% with the following probabilities.
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