An investor purchases 200 shares of Merxx on margin. The shares are trading at $40. Schrub Brokerage charges 8 percent interest on its margin accounts, and transactions cost are one percent on both ends. Initial and maintenance margins are 50 percent and 25 percent. 200 * 40 * .5 = 4000 = your investment 200 * 40 * .01 = 80 = initial commision cost Is your investment 4000 or 4080? I have seen conflicting calculations between CFA texts and Q-Bank. CFA does include… Q-Bank does not. Thanks
I have included
You need to include the commission cost to your initial investment as an total initial outlay, So ideally it should be $4080 for the above problem. - Dinesh S
thanks for the input… watch out for Q-Bank then. it does not include the intial commision paid in your investment.