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Upgrade to remove ads. How do margin trades magnify both the upside potential and downside risk of an investment portfolio?

As such, when the price of the security rises or falls, the gain or loss represents a much higher percentage, relative to the actual money invested.

FINC Practice Problems 3 Flashcards | Quizlet

What is your maximum possible loss? What is the rate of return on her investment? By the end of the year, the amount of the loan owed to the broker grows to: The value of the stock falls to: The remaining margin in the investor's account is: You are bullish on Telecom stock. Ignore the expected dividend. Assume the price fall happens immediately.

The rate of return will be: You will not receive a margin call. You will receive a margin call when: You paid 50 cents per share in commissions for each transaction.

What is the value of your account on April 1? The proceeds from the short sale net of commission were: Your net proceeds per share was: What's the remaining margin in dollar value in the account?

The initial margin was. Yes, the firm will receive a margin call.

Assume that Intel pays no dividends. The gain or loss on the short position is: