Question

Bill Campbell invested $5,300 and borrowed $5,300 to purchase shares in Kellogg. At the time of his investment, Kellogg stock was selling for $53 a share. Note: There were no commissions to buy or sell this stock.

(a) How many shares could he buy if he used his $5,300 and borrowed $5,300 on margin to buy Kellogg stock?

Note: Round up your final answer to the nearest whole unit.

(b) Assuming Bill did use margin, sold his Kellogg stock $58 a share, how much profit did he make on his Kellogg investment?

Note: Round up your intermediate value of "Total shares" to the nearest whole unit. Round your final answer to 2 decimal places.

Answer 1

Explanation:

Bill has $ 10600 to buy shares at $ 53 / share

10600/ 53 = 200 shares to buy

now sell 200 at $ 58 /share

= $ 11600

$ 11600 - 10600 = $ 1000 profit