Purchase Solution

Holding period return in rising & declining of stock prices

Not what you're looking for?

Ask Custom Question

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).

Purchase this Solution
Solution Summary

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

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 ...

Purchase this Solution
Free BrainMass Quizzes
Basics of corporate finance

These questions will test you on your knowledge of finance.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

View More Free Quizzes
Related BrainMass Solutions

  • Returns

    The prices for IMB over the last 3 years are given below. Assuming no dividends were paid, what was the 3-year holding period return?

  • Financial derivatives

    Similarly, a seller of such commodities will sell the futures contract and lock-in a selling price in advance for a certain period to avoid losses against declining prices. Such practice can be termed as hedging via futures or forwards contracts.

  • LIFO or FIFO

    501916 LIFO or FIFO During a period of rising inventory costs and stable output prices, describe how new income and total assets would differ depending upon whether LIFO or FIFO is applied.

  • Call Options, Holding Period Return, Alternative investment

    Using a 6-month holding period and assuming the stock does indeed rise to $80 over this time frame: 1. Find the value of both calls, given that at the end of the holding period neither contains any investment premium. 2.

  • Investment Problem/Graph

    Calculate the holding period return for the price weighted index over the entire sample period. e. Go to Yahoo Finance to determine how many shares are outstanding for each stock.

  • Calculating rate of return with Excel

    AAPL Stock Prices Date Price Rate of return 2006 59.77 2007 121.2 102.76% 2008 188.8 55.75% 2009 135.8 -28.05% 2010 256.9 89.15% 2011 337.4 31.35% c. Calculate the total return for the entire holding period.

  • Holding period return - S & P 500 Index, Ford Motor Company

    279864 Holding period return - S & P 500 Index, Ford Motor Company The attach fill provides the end-of month prices for both the Standard & Poor's 500 Index and Ford Motor Company's common stock.

  • Declining Growth Stock valuation

    The solution explains the valuation of a declining growth stock

  • Investment Fundamentals and Portfolio Management questions

    Compute the holding-period return on this investment. b. Compute the holding period return assuming that the investor could buy this stock borrowing half of the purchase price at 12 percent per annum interest. c.

View More Related Solutions