All categories

2 years ago

How do margin trades magnify both the upside potential and the downside risk of an investment position?

Business

1 answer:

klio [65]2 years ago

4 0

Answer and Explanation:

Margin trades work this way because they allow them to extend the amount of money invested regardless of whether the security's price drops or rises. In a more simplified way, we can state that the margin trade allows that even if the price of a security goes up or down, the invested money presents a percentage of gain or loss much bigger than the original value. This is because this money was deposited as a loan guarantee, allowing interest to run on it, increasing it.

You might be interested in

If the MPC is 0.75 and there are no crowding-out or accelerator effects, then an initial increase in aggregate demand of $100 bi

umka21 [38]

Answer:

c. $400 billion

Explanation:

Calculation to determine what an initial increase in aggregate demand of $100 billion will eventually shift the aggregate demand curve to the right

First step is to calculate the GDP Multiplier

Using this formula

GDP Multiplier=1/(1-MPC)

Let plug in the formula

GDP Multiplier=1/1-0.75

GDP Multiplier=1/0.25

GDP Multiplier=4

Now let determine the shift in aggregate demand curve

Shift in aggregate demand curve=4*100 billion

Shift in aggregate demand curve= $400 billion

Therefore an initial increase in aggregate demand of $100 billion will eventually shift the aggregate demand curve to the right by $400 billion

5 0

3 years ago

Stone Foods produces the majority of its cheese products in its U.S. based dairy division at a total outlay cost of $6.00 per un

lubasha [3.4K]

Answer:

Stone Foods produces the majority of its cheese products in its U.S. based dairy division at a total outlay cost of $6.00 per unit. A large portion of the finished product is sold to Division B where it is packaged and sold overseas under a different label. The tax rate in Division B's country is higher than the U.S. tax rate. Assume the company desires to minimize the overall tax impact of the transfer (i) what type of relative pre-tax income should each division desire to achieve as a result of the transfer and (ii) what type of transfer price would accomplish your answer to (i).

Dairy Division Income Division B Income Transfer Price .

Option "D" is the correct answer - High Low High.

Explanation:

Since in Division B, the tax rate is higher than the tax rate in US-based dairy division. Therefore to minimize the impact of the overall tax, transfer price from dairy division should be high to Division B so that the dairy division income would be higher. and the income of Division B would be lower.

Hence option "D" is the correct answer.

3 0

3 years ago

Albert Inc. has both common and preferred stock outstanding. Which should be listed first in the stockholders' equity section of

Talja [164]

Answer: Preferred Stock

3 0

2 years ago

Suppose a new website was launched providing up-to-date, credible information on all firms wishing to issue bonds. What would yo

guapka [62]

Answer:

Refer below.

Explanation:

I foresee that loan costs would fall with the arrival of forward-thinking, dependable data on all organizations wishing to give bonds on account of expanded buyer request. This data would make it simpler for financial specialists to decide the reliability of firms and request should rise on account of the simplicity and help in dynamic. At the point when request rises, loan fees decrease.

6 0

3 years ago

Riverside Manufacturing designs and manufactures bathtubs for home and commercial applications. Riverside recorded the following

Gnoma [55]

Answer:

Explanation:

Variable MOH rate variance = Actual Hours × (Actual Rate - Standard Rate)

= 4050 × ($7.50 - $4.50)

= 12150

4 0

3 years ago