Question

Question 5. Bob Orleans invested $3,000 and borrowed $3,000 to purchase shares in Verizon Communications. At the time of his investment, Verizon was selling for $47 a share.
o If Bob paid a $30 commission, how many shares could he buy if he used only his own money and did not use margin?
o If Bob paid a $60 commission, how many shares could he buy if he used his $3,000 and borrowed $3,000 on margin to buy Verizon stock?
o Assume Bob did use margin and paid a $60 total commission to buy his Verizon stock. Also, assume he paid another $60 to sell his stock and sold the stock for $54 a share. How much profit did he make on his Verizon stock investment?

Answer 1

The number of shares could he buy is 63.19 and 126.38. Then the profit gained by Bob is $764.68.

What is the profit gained by Bob?

Bob Orleans invested $3,000 and borrowed $3,000 to purchase shares in Verizon Communications.

At the time of his investment, Verizon was selling for $47 a share.

If Bob paid a $30 commission, then the number of shares could he buy if he used only his own money and did not use margin.

$\rightarrow \dfrac{3000- 30}{47}\\\\\rightarrow \dfrac{2970}{47}\\\\\rightarrow 63.19$

If Bob paid a $60 commission, then the number of shares could he buy if he used his $3,000 and borrowed $3,000 on margin to buy Verizon stock will be

$\rightarrow \dfrac{6000 - 60 }{47}\\\\\rightarrow \dfrac{5940}{47}\\\\\rightarrow 126.38$

Assume Bob did use margin and paid a $60 total commission to buy his Verizon stock. Also, assume he paid another $60 to sell his stock and sold the stock for $54 a share. Then the profit will be

$\rightarrow (126.38 \times 54 - 60) - (6000)\\\\\rightarrow (6824.68 - 60) - 6000\\\\\rightarrow 6764.68 - 6000\\\\\rightarrow \ 764.68$

More about the profit link is given below.

brainly.com/question/15036999

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