Hi !!! I really really need help with this question. Marlene Bellamy purchased 5

Question

Hi !!! I really really need help with this question. Marlene Bellamy purchased 500 shares of Writeline Communications stock at $56.66 per share using the prevailing minimum initial margin requirement of 60%. She held the stock for exactly 4 months and sold it without any brokerage costs at the end of that period. During the 4-month holding period, the stock paid $1.61 per share in cash dividends. Marlene was charged 7.6% annual interest on the margin loan. The minimum maintenance margin was 25%. a. Calculate the initial value of the transaction, the debit balance, and the equity position on Marlene's transaction. b. For each of the following share prices, calculate the actual margin percentage, and indicate whether Marlene's margin account would have excess equity, would be restricted, or would be subject to a margin call: (1) $44.54, (2) $71.64, and (3) $34.48. c. Calculate the dollar amount of (1) dividends received and (2) interest paid on the margin loan during the 4-month holding period. d. Use each of the following sale prices at the end of the 4-month holding period to calculate Marlene's annualized rate of return on the Writeline Communications stock transaction: (1) $50.22, (2) $60.21, and (3) $70.53.

Explanation / Answer

given, Share value=500shares@56.66$/share=28,330$

Initial Margin requirement=60% of 28,330= 16,998$

holding period =4 months

Dividend paid=1.61$/sharex500 shares=805 $

Margin loan= 28330-16998=11,332$

Interest charges on loan amount for 4 months=11332x7.6%x4/12=287.08$

Minimum Maintenance Margin=25%

a) Initial value of transaction= 28,330 $

Marlene equity=16,998$ and Debit balance is equal to Loan amount = 11,332$

b)

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c. 1. dividend receiced= 1.61x500=805$

2. Interest paid= 11332*7.6%*4/12=287.08$

d.

Sl no Share Price($) Share value ($) Marlene equity requirment ($) Actual Margin %(16998-Marlene equity requirement)*60% whether Margin call 1 44.54 22270

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76% No, as more than 25% Maint Margin 2 71.64 35820 21492 47% No, as more than 25% Maint Margin of 8, 955$ 3 34.48 17240 10344 99% No, as more than 25% Maint Margin

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