Accounting & Finance Point
Chap-3
Investment Practice Sheet
Analysis & The Rule of
Portfolio Financial
For BBA/MBA Students
Management Market
Part-1 How Securities are Traded
Part-B+C
Practice-1
Suppose that the investor initially pays Tk. 6,000 toward the purchase of Tk. 10,000 worth of stock (100 shares
at Tk. 100 per share), borrowing the remaining Tk. 4,000 from the broker. What is the initial margin?
Practice-2
Mr. Emdad wants to invest Tk. 10,00Q to purchase equity shares of Square Pharma Ltd.; but due to insufficient
fund he asked his broker to provide Tk. 3,000 for the desired Investment. If the broker accepted the offer and
act accordingly, then what will be the initial margin of Mr. Emdad?
Practice-3
Total value of the share Tk. 10,000; Percentage of Debt Fund is 40%;
Required: Find out the cash needed by the investor to initiate the investment in margin agreement.
Practice-4
Mr. Tarun has a long-cherished desire to invest in the equity share of Metro Spinning Ltd. He wants to buy
2000 shares at a current market of Tk. 16 per share. The broker has agreed to provide Tk. 16,000 as loan.
Determine the initial margin of Mr. Tarun.
Practice-5
The initial Balance sheet of an investor is as follows
Assets Tk. Liabilities and Owner's Equity Tk.
Value of Stock (100 shares at 10,000 Loan from Broker 4,000
Tk. 100 per share) Equity (Own Fund) 6,000
10,000 10,000
If the stock price declines to Tk. 70 per share then calculate the actual margin of the investor.
Practice-6
Buck Ewing opened a margin account at a local brokerage firm. Buck's initial investment was to purchase 200
shares of Woodbury Corporation on margin at Tk. 40 'per share. Buck borrowed Tk. 3,000 from a broker to
complete the purchase.
(a) At the time of the purchase, what was the actual margin in Buck's account?
(b) If Woodbury stock subsequently rises in price to Tk. 60 per share, what is the actual margin in Buck's account?
(c) If Woodbury stock subsequently falls in price to Tk. 35 per share, what is the actual margin in Buck's account?
Practice-7
Mr. Sumon with a margin account intends to buy 500 shares of stock of Sonali Bank Ltd. Current market price
of the share is Tk. 10.5. His broker asks him to put 60% to initiate the transaction. How much Mr. Suasion is
required to deposit?
Practice-8
Lizzie Arlington has deposited Tk. 15,000 in a margin account with a brokerage firm. If the initial margin
requirement is 50%, what is the maximum Taka amount of stock that Lizzie can purchase on margin?
Practice-9
Snooker Arnovich buys on margin 1,000 shares of Rockford Systems stock at Tk. 60 per share. The initial
margin requirement is 50% and the maintenance margin requirement is 30%. If the Rockford stock falls to Tk.
50 will Snooker receive a margin call?
Practice-10
Avalon Company's stock is currently selling for Tk. 15 per share. The initial margin requirement is 60% and
the maintenance margin requirement is 35%. Cap Anson buys 100 shares of Avalon stock on margin. To what
price must the stock fall for Cap to receive a margin call?
Practice-11
Beauty Bancroft short sells 500 shares of Rockdale Manufacturing at Tk. 25 per share. The initial margin
requirement is 50%. Prepare Beauty's balance sheet as of ne time of the transaction.
Practice-12
An initial margin requirement is 50% on a Tk. 10,000 transaction (1,000 shares @ Tk. 10 each). Calculate
actual margin if share price drops to Tk. 8.50 and 7.50 from Tk. 10. What will be the margin call price?
Assume that maintenance margin is 30%
Practice-13
Given, Purchase price = Tk. 100; Sales price = Tk. 180
Annual dividend earned = Tk. 20 Brokerage fees = Tk. 10
Required: Calculate the Return on Investment (ROI)
Practice-14
Consider an investor who wants to buy 100 Equity Shares @ 11. 50 per share because he feels it will rise to Tk.
75 by the end of the year. The equity share will pay Tk. 1 per share as annual dividend. The investor is going to
buy the equity shares with 60% margin and pay, 10% interest on the margin loan. What will be the rate of
return on the proposed investment?
Practice-15
An investor purchased an asset for Tk. 500. At the end of the holding period he had been given Tk. 60 as
dividend and charged Tk. 8 as commission. The reselling price was Tk. 600. Calculate the rate of return from
this investment.
Practice-16
Assume an initial, margin requirement of 50 percent and a maintenance margin of 30 percent. An investor buys
100 shares of stock, on margin at Tk. 60 per share. The price of the stock subsequently drops to Tk. 50.
Requirements:
(i) What is the actual margin at Tk. 50.
(ii) The price now rises to Tk. 55. Is the account restricted?
(iii) If the price declines to Tk. 49, is there a margin call?
(iv) Assume the price declines to Tk. 45, what is the amount of the margin call? At Tk. 35?
Practice-17
Assume an investor buys 1,000 shares of common stock of Douglas Inc. @ Tk. 100 from his broker, where he
has to put up Tk. 50,000 to initiate the transaction. You are required to calculate
(i) The initial margin;
(ii) The actual margin when the share price drops to Tk. 90 per share. Does the investor need to satisfy a
call margin if the maintenance margin is 30%?
(iii) What is the cash amount required to equalize the investor's equity at a market price of Tk. 65 per share?
(iv) Prepare and show the balance sheet of the investor's margin account after the cash deposit.
Practice-18
An investor buys 10,000 shares of Square Company @ Tk. 20 from a broker, where he has put up Tk. 1, 00,000
to initiate the transaction. You are required to compute
i. The initial margin.
ii. If the price drops to Tk. 18 and the maintenance margin is 30% does the investor satisfy a call margin?
iii. What is the cash amount required to equalize the investor's equity at a market price of Tk. 13?
iv. Prepare and show the balance sheet of the investor's equity margin A/C after the cash deposit.
Practice-19
Mr. Afnan, an investor, buys 5,000 shares of common stock of Square Pharma Ltd. @ Tk. 50 each from broker,
where he has put up Tk. 1, 25,000 to initiate the transaction. You are required to find out:
(i) The initial margin;
(ii) The actual margin when the share price drops to Tk. 45 per share. Does the investor need to satisfy a
call margin if the maintenance margin is 35%?
(iii) What is the amount of margin call at a market price of Tk. 40?
Practice-20
Assume an initial margin requirement of 50% and a maintenance margin of 30%. An investor buys 200 shares
of stock on margin at Tk. 60 per share. The price of the stock subsequently drops to Tk. 50.
Required:
i. What is the actual margin at Tk. 50?
ii. The price per share raised to Tk. 55. Is the account restricted?
iii. If the price declines to Tk. 49 is there a margin call?
iv. Assume the price declines to Tk. 45. What is the amount of margin call?
