Question

The Marrs' brokerage firm employs an initial margin of 50% and a maintenance margin of 35%, and it charges 7% annual margin interest. Calculate the Marrs' holding period return on XYZ stock with a cash purchase and with a margin purchase. A) Cash 14.29%, margin -26.33% B) Cash 16.67%, margin -26.33% C) Cash 14.29%, margin -6.67% D) Cash 16.67%, margin -6.67%

Name: the marrs brokerage firm employs an initial margin of 50 and a maintenance margin of 35 and it charges 7 annual margin interest calculate the marrs holding period return on xyz stock with a 24036
Uploaded: 2023-11-17T22:34:49-08:00
Duration: 2 min 38 s
Channel: Akash M
Description: the marrs brokerage firm employs an initial margin of 50 and a maintenance margin of 35 and it charges 7 annual margin interest calculate the marrs holding period return on xyz stock with a 24036

          The Marrs' brokerage firm employs an initial margin of 50% and a maintenance margin of 35%, and it charges 7% annual margin interest. Calculate the Marrs' holding period return on XYZ stock with a cash purchase and with a margin purchase.

A)
Cash 14.29%, margin -26.33%
B)
Cash 16.67%, margin -26.33%
C)
Cash 14.29%, margin -6.67%
D)
Cash 16.67%, margin -6.67%

Added by William P.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Akash M

11/17/2023

Step 1

This is simply the percentage change in the stock price over the holding period. Let's assume the stock was purchased at $100 and sold at $115 after one year. The holding period return on a cash purchase is: HPR_cash = (115-100)/100 = 0.15 or 15% Show more…

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The Marrs' brokerage firm employs an initial margin of 50% and a maintenance margin of 35%, and it charges 7% annual margin interest. Calculate the Marrs' holding period return on XYZ stock with a cash purchase and with a margin purchase. A) Cash 14.29%, margin -26.33% B) Cash 16.67%, margin -26.33% C) Cash 14.29%, margin -6.67% D) Cash 16.67%, margin -6.67%