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FIN 402 Week 1 Assignment Case Problem 1.2 Preparing Carolyn
Bowen’s Investment Plan FIN 402 Week 1 Assignment Case Problem
2.1 Dara’s Dilemma: What to Buy? FIN 402 Week 1 Assignment
Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account FIN
402 Week 1 Assignment Case Problem 3.1 The Perezes’ Good
Fortune FIN 402 Week 1 Assignment Case Problem 12.1 Reverend
Mark Thomas Ponders Mutual Funds
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FIN 402 Week 1 Assignment Case Problem 2.2 Ravi Dumar’s
High-Flying Margin Account
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Case Problem 2.2 Ravi Dumar’s High-Flying Margin Account Ravi
Dumar is a stockbroker who lives with his wife, Sasha, and their five
children in Milwaukee, Wisconsin. Ravi firmly believes that the only
way to make money in the market is to follow an aggressive
investment posture—for example, to use margin trading. In fact, Ravi
has built himself a substantial margin account over the years. He
currently holds $75,000 worth of stock in his margin account, though
the debit balance in the account amounts to only $30,000. Recently
Ravi uncovered a stock that, on the basis of extensive analysis, he
feels is about to take off. The stock, Running Shoes (RS), currently
trades at $20 per share. Ravi feels it should soar to at least $50 within
a year. RS pays no dividends, the prevailing initial margin
requirement is 50%, and margin loans are now carrying an annual
interest charge of 10%. Because Ravi feels so strongly about RS, he
wants to do some pyramiding by using his margin account to purchase
1,000 shares of the stock. Questions a. Discuss the concept of