Suppose that xtel currently is selling at $20 per share. you buy 1,000 shares using $15,000 of your own money, borrowing the remainder of the purchase price from your broker. the rate on the margin loan is 8%.

a. what is the percentage increase in the net worth of your brokerage account if the price of xtel immediately changes to: (i) $22; (ii) $20; (iii) $18? what is the relationship between your percentage return and the percentage change in the price of xtel?

% change in net worth = 13.33%

% change in net worth = 0%

% change in net worth = -13.33%

Explanation:

given data

No of shares bought = 1,000    

Current Market Price = $20    

Required funds to purchase = $20 × 1000  = $20,000    

Own funds = $15,000    

Borrowed funds (Deficit) = 5,000    

Rate on margin loan = 8%

solution

we know here that Required funds to purchase is = $20 × 1000  = $20,000   and

net worth = No of shares × Current Market Price of shares - Borrowed funds

so

Current Net worth= 1000 × 20 - 5000

Current Net worth = $15000  

so for price of xtel immediately changes $22

as Net worth at various price levels =  17000

so % change in net worth =

% change in net worth = 13.33%

and

so for price of xtel immediately changes $20

as Net worth at various price levels =  15000

so % change in net worth =

% change in net worth = 0%

and

so for price of xtel immediately changes $18

as Net worth at various price levels =  13000

so % change in net worth =

% change in net worth = -13.33%

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.