- Tax Planning
- Investments 1: Before you Invest
- Investments 2: Your Investment Plan
- Investments 3: Securities Market Basics
- Investments 4: Bond Basics
- Investments 5: Stock Basics
- Investments 6: Mutual Fund Basics
- Investments 7: Building Your Portfolio
- Investments 8: Picking Financial Assets
- Investments 9: Portfolio Rebalancing and Reporting
- Retirement 1: Basics
- Retirement 2: Social Security
- Retirement 3: Employer Qualified Plans
- Retirement 4: Individual and Small Business Plans
- Estate Planning Basics
Case Study #3
Data:
Kim just purchased 1,000 shares of NS corporation at $15 per share, and 50 percent was purchased on margin (i.e., she borrowed 50 percent to buy the shares). She held the shares for 6 months and sold them. Interest on her margin loan was 12 percent annually.
Calculations:
a. Assuming the price increased to $30 per share and Kim sold the shares, what is the total profit of her investment after paying back the loan with interest?
b. Assuming the price decreased to $5.00 per share and she sold the shares, what is the total profit (loss) of her investment after paying back the loan with interest?
c. Generally, should an individual buy on margin?
