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    Holding period return in rising & declining of stock prices

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    Rudolfo purchased 900 shares of stock for $62.20 a share six months ago. The initial margin requirement on this stock is 75 percent and the maintenance margin is 40 percent. Rudolfo pays a 3% on his margin loan, what is his holding period return if today when he sells it, stock price rises by 25%? What if the stock price declines by 25%? (note: 3% is annualized effective rate).

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    https://brainmass.com/business/payback-period-and-discounted-payback-period/holding-period-return-rising-declining-stock-prices-349761

    Solution Preview

    If the stock rise by 25%

    Total Value of Shares = 900*62.20=55980
    Initial Margin (Equity investment)= 75%*55980=41985
    Loan Amount = 25%*55980=13995
    If stock price rises by 25%, new stock price = 62.20*(1+25%)=77.75
    Value of ...

    Solution Summary

    This post shows how to calculate holding period return in rising and declining of stock prices.

    $2.19

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