You Have $25,000 to Invest and Want to Purchase Stock

question 75

Multiple Choice

You have $25,000 to invest and want to purchase stock on margin. If the stock currently sells for $110 per share, and the initial margin is 60 percent, how many shares can you purchase?

• A) 378 shares
• B) 346 shares
• C) 294 shares
• D) 227 shares
• E) 362 shares

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Definitions:

Implicit Costs

Costs that represent potential benefits foregone when resources are not utilized in their next-best alternative use.

Economic Profit

The financial gain achieved when revenues from business activity exceed the explicit and implicit costs of that activity.

Implicit Costs

Costs that represent the opportunity costs of using resources that the firm already owns, unlike explicit costs which involve direct monetary outlay.

Economic Loss

A decrease in financial wealth, goods, or resources, often as a result of business activities or economic policy decisions.