Financial Market Question
Lauren has a margin account and deposits $50,000. Assume the prevailing margin requirement is 40 percent, commissions are ignored, and the gentry Shoe Corporation is selling at $35 per share.
a. How many shares can Lauren purchase using the maximum allowable margin? b. What is Lauren’s profit (loss) if the price of Gentry’s stock:
- rises to $45?
- Falls to $25?
Compute the abnormal rates of return for the five stocks in Problem above assuming the following systematic risk measures (betas):
StockBi
B0.95
F1.25
T1.45
C0.70
E-0.30
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