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You have a margin account and deposit Rs.90,000. Assuming the prevailing margin requirement is 20%, commissions are ignored and D.G.K Cement stock is selling at Rs.55 per share while Askari Cement stock is selling at Rs. 85 per share. You invest 40% of your investment in D.G.K cement while remaining is deposited in Askari cement. a. How many shares of each stock can you purchase using the maximum allowable margin if you invest in both? b. What is your total and percentage profit (loss) if: 1. the price of D.G.K Cement Rises to Rs.65 per share while Askari Cement stock rises to Rs. 97 per share? 2. the price of D.G.K Cement reduces to Rs.42 per share while Askari Cement stock reduces to Rs. 76 per share? c. If you invest all money in D.G.K cement ONLY and the maintenance margin is 25%, to what price can D.G.K Cement stock fall before you will receive a margin call? d. If you invest all money in Askari cement ONLY and the maintenance margin is 25%, to what price can Askari cement stock fall before you will receive a margin call?

You have a margin account and deposit Rs.90,000. Assuming the prevailing margin requirement is 20%, commissions are ignored and D.G.K Cement stock is selling at Rs.55 per share while Askari Cement stock is selling at Rs. 85 per share. You invest 40% of your investment in D.G.K cement while remaining is deposited in Askari cement. a. How many shares of each stock can you purchase using the maximum allowable margin if you invest in both? b. What is your total and percentage profit (loss) if: 1. the price of D.G.K Cement Rises to Rs.65 per share while Askari Cement stock rises to Rs. 97 per share? 2. the price of D.G.K Cement reduces to Rs.42 per share while Askari Cement stock reduces to Rs. 76 per share? c. If you invest all money in D.G.K cement ONLY and the maintenance margin is 25%, to what price can D.G.K Cement stock fall before you will receive a margin call? d. If you invest all money in Askari cement ONLY and the maintenance margin is 25%, to what price can Askari cement stock fall before you will receive a margin call?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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You have a margin account and deposit Rs.90,000. Assuming the prevailing margin
requirement is 20%, commissions are ignored and D.G.K Cement stock is selling at
Rs.55 per share while Askari Cement stock is selling at Rs. 85 per share. You invest 40%
of your investment in D.G.K cement while remaining is deposited in Askari cement.
a. How many shares of each stock can you purchase using the maximum allowable
margin if you invest in both?
b. What is your total and percentage profit (loss) if:
1. the price of D.G.K Cement Rises to Rs.65 per share while Askari Cement stock
rises to Rs. 97 per share?
2. the price of D.G.K Cement reduces to Rs.42 per share while Askari Cement
stock reduces to Rs. 76 per share?
c. If you invest all money in D.G.K cement ONLY and the maintenance margin is 25%,
to what price can D.G.K Cement stock fall before you will receive a margin call?
d. If you invest all money in Askari cement ONLY and the maintenance margin is 25%,
to what price can Askari cement stock fall before you will receive a margin call?

 

(this above question is related to Ivestment portfolio and management)

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