All About Margins Economics 71a Spring 2007 Extra.

Slides:

Advertisements

Similar presentations

Market Speculation Too Great A Risk?. The American Dream Goal: Achieve permanent prosperity Belief: Everyone can be rich by investing money in the stock.

Advertisements

Were still arguing about it but the culprits likely were: Underinvestment, underconsumption, monetary policy and trade wars.

Stock Market Crash (1929) Students will understand the causes and importance of the Stock Market Crash –Crash marks the beginning of the Great Depression.

Simple Interest I =Prt I = Interest P = Principle r = rate t = time

XIV. MARGIN INVESTING. A. DEFINITIONS 1.Leverage – Using borrowed money to multiply investment returns 2.Margin Loan – A loan from a brokerage firm secured.

The Great Depression How was a decade of prosperity followed by a decade of hopelessness?

Unit Home Ownership Learning Objectives: Understand the three requirements to buy a home How to calculate debt-to-income ratios Realize how home.

1 Sources of Capital SECTION 1: Saving SECTION 2: Investing SECTION 3: Stocks, Bonds, and Futures SECTION 4: Borrowing and Credit CHAPTER 9.

CHAPTER 2 BUYING AND SELLING SECURITIES. THE SECURITIES MARKET n BROKERS DEFINITION: act as agents for investors and compensated by commissions.

Returns Economics 71a: Spring 2007 Lecture notes 3.2 (extra)

Foreign Exchange and Currencies Economics 71a Spring 2007 Mayo, Chapter 6 (skim) Lecture notes 2.6.

What is a Stock???  A Stock represents a share in the ownership of a company.  By purchasing a stock you become a shareholder/part owner of that company.

Investments BSC III Winter Semester 2010 Lahore School of Economics.

The Great Depression Begins

Present Value and “discount rates” What is R? Econ 71a: Spring 2007 Lecture 3.1(extra)

Days 8 & 9 discussion: Continuation of binomial model and some applications FIN 441 Prof. Rogers Spring 2011.

ADVERTISE THIS! Our Product Name: Price: Where to buy it: How to use it and good points:

Causes of the Great Depression

DESCRIBE SOCIAL AND ECONOMIC CONDITIONS FROM THE 1920S THROUGH THE GREAT DEPRESSION REGARDING FACTORS LEADING TO A DEEPENING CRISIS, INCLUDING THE COLLAPSE.

Short Selling Objective: You’re bearish on a stock --- you think its price will be lower in the future. You want to Sell high now, and in the future Buy.

THE STOCK MARKET CRASH AND THE GREAT DEPRESSION EVENTS THAT HELPED CAUSE THE STOCK MARKET CRASH: 1. OVERSPECULATION: Stock prices had risen far above the.

The Stock Market Crash Background 1920s appeared to be a decade of prosperity = “The Roaring 20s” 1920s appeared to be a decade of prosperity =

Selling Short n Objective n Know the 5 steps of selling short. n Be able to identify the steps in the video clip. n Understand the risk of selling short.

The Causes of the Great Depression

Installment Plans and Stocks Causes of the Great Depression.

The Cost of Credit BBI2O Introduction To Business Unit 3: Finance 3.D Credit.

Great Depression Brother can you spare a dime? Objective #1.

Agenda Was it really raining money??? Notes Acrostic poem “Economic boom”

Using Percents Part 2.

Customers deposit money in a bank Banks invest that money by making loans Banks make money on the interest from loans.

Causes of the Great Depression. Stock Market Soars Bull Market- long period of rising stock prices In the late 1920’s, a bull market had many people investing.

AP World History POD #25 – American Supremacy

FINANCIAL SECURITIES: MARGIN ACCOUNTS CIE 3M1. AGENDA OPENING A MARGIN ACCOUNT OPENING A MARGIN ACCOUNT MARGIN ACCOUNTS: A DEFINITION MARGIN ACCOUNTS:

SINGAPORE HONG KONG INDIA INDONESIA LONDON MALAYSIA NEW YORK PHILIPPINES TAIWAN THAILAND VIETNAM | Margin Trading 05 June 2008.

Economic Factors of the Great Depression

Dow Jones Industrial Average What is the DJIA –Invented by Charles H. Dow –It is an average of stock prices of major industries –Started with 12 stocks.

Additional Topics Additional items to address: Holding Period Return Short Selling with Margin Requirements.

1 USA 1919 – 41 Exam Technique © OG Scott Question 1(d) Explain the effects of the fall in value of shares on Wall Street during 1928.

Using only a portion of the proceeds for an investment Borrow remaining component Margin arrangements differ for stocks and futures Margin Trading Example.

Watching the Economy Crumble.  Explain what the stock market crash was  Identify and explain factors that led to the stock market crash.

Overview of Monday, October 15 discussion: Binomial model FIN 441 Prof. Rogers.

Causes of the Great Depression. Signs of economic trouble Uneven wealth – 1% of population controlled 34% of the wealth. Living on credit – Installment.

Lesson 7.6 Concept: How to find simple interest Guidelines: When you compute simple interest for a time that is less than 1year, write the time as a fraction.

Chapter- 02 (William Sharpe) Chapter- 03 (B. K. M.) Buying & Selling Securities Md. Shoriful Islam Senior Lecturer in Finance.

LLLLLLLeeeeeeeeettttteerssssss. Read the definition and then put the letters in the correct order in order to find the word defined.

Troubles of the 30s.  People who bought stocks on margin (on credit with 10% down) were now being asked to pay brokers the money they still owed.  On.

A item is marked 25% off and then you are given an additional discount of 10%. What will you pay? Are receiving a total of 35% off? Explain why or why.

Election of 1928 Incumbent – Calvin Coolidge o “I do not choose to run for President in 1928” – August 1927 Republican – Herbert Hoover o “We in America.

Margin Long position: You bought 1000 shares of common for $30 per share on margin. Initial margin = 50% Maintenance margin = 35% Initial MV = 1000*$30.

Investment and the Economy. Supply and Demand  This “law” is the principle which governs the market value of any item bought and sold.  The best examples.

Bonds. How to Borrow?  Two traditional ways of borrowing: –Borrow from a bank (e.g., get a loan) –Interest rate is set when the contract is signed 

GOALS BUSINESS MATH© Thomson/South-WesternLesson 7.4Slide 1 7.4Buying Bonds Calculate the market price of bonds Calculate the total investment in bonds.

How to Read a Portfolio SMG Info. Account Summary The Account Summary displays portfolio information as of today. If a number is red and parenthesis,

 A market in which stocks are down  Those who buy and sell stocks.

Keynesianism MK, Unit 23. Reading p. 117 Read the text and underline the main ideas connected with classical economic theory, Keynesianism, and Monetarism.

Millennials are biggest part of Labor Force. Interest Rates Loans for Houses, Cars & College.

Economics in History. The Business Cycle The Business Cycle: Short-run changes in the economy between expansion/growth and contraction/recession Boom.

The Economy The Economy Introduction  The economy of a country refers to things like prices, jobs, wages and employment.  The economy of.

4.3 The functions of Stock Exchanges

1 Paul Redmond Portfolio Management – MGMT4017 Dublin Institute of Technology Semester 2 - Spring 2015 Dr Paul Redmond What will we.

Aim: To what extent was the Great Depression inevitable?

Chapter 24 The Great Depression Section 1 Prosperity Shattered.

CAUSES OF THE GREAT DEPRESSION What caused the most severe economic crisis in American history?

Chapter 8- The Great Depression Essential Question- How did the collapse of the economy impact the United States?

Stock Market Crash Causes Risky investing- (investing all of their savings or borrowing to invest) All of the speculation leads to rising stock prices.

The “Roaring 20s”…. The “Roaring 20s”… Come to a Crashing End “Black Tuesday”

Unit 6 Day 10 (Black Tuesday) Quote: “There is no cause to worry. The high tide of prosperity will continue.” - Andrew W. Mellon, Secretary of the Treasury.

Chapter 2 Buying and Selling Securities. 2-2 Buying and Selling Securities “Take all your savings and buy some good stock and hold it till it goes up.

Presentation transcript:

All About Margins Economics 71a Spring 2007 Extra

Margin Requirements  Margins on longs Calculation Maintenance  Margins on shorts

Margins on Longs

Example  Buy 100 shares at $10 share, 0.75 margin Total value = = (1000-borrowed)/1000 Borrowed = 250  Price falls to $5 share Total value = 500 margin = ( )/500 = 0.50

Maintenance Margin  As prices fall, broker investors are worse off  Broker worries about whether they can pay off loans  Maintenance margin = margin where broker forces investor to come up with more money  Hitting this is known as a “margin call”

Example  Buy 100 shares at $10 share, 0.75 margin Total value = = (1000-borrowed)/1000 Borrowed = 250  Maintenance margin = =(p* )/p*100 Solve for p, p =