Mary Reid invested $3,000 and borrowed $3,000 to purchase shares in JP Morgan Chase. At the time of her investment, Chase was selling for $140 a share.

If Mary paid a commission of $14, how many shares could she buy if she used only her own money and did not use margin?

Note: Round your answer to 1 decimal place.

If Mary paid a commission of $22, how many shares could she buy if she used her $3,000 and borrowed $3,000 on margin to buy Chase stock?

Note: Round your answer to 1 decimal place.

Assume Mary did use margin to buy her Chase stock. Also, assume she paid another $22 to sell her stock and sold the stock for $156 a share. How much profit did she make on her Chase stock investment?

Note: Round intermediate calculations to 1 decimal place. Round your final answer to 2 decimal places.



### Part 1: Buying with only her own money (no margin)
Mary has $3,000 of her own money to invest, but she also needs to pay a commission of $14. Therefore, the total amount available to buy shares is:

\[
\text{Amount available} = 3000 - 14 = 2986
\]

The stock price is $140 per share, so the number of shares she can buy is:

\[
\text{Shares} = \frac{2986}{140} = 21.33 \, \text{shares}
\]

### Answer: 
Mary could buy **21.3 shares** if she used only her own money and did not use margin.

---

### Part 2: Buying with $3,000 of her own money plus $3,000 on margin
Now, Mary has a total of $6,000 to invest ($3,000 of her own and $3,000 borrowed on margin). However, she must pay a $22 commission. Therefore, the total amount available to buy shares is:

\[
\text{Amount available} = 6000 - 22 = 5978
\]

At $140 per share, the number of shares she can buy is:

\[
\text{Shares} = \frac{5978}{140} = 42.70 \, \text{shares}
\]

### Answer: 
Mary could buy **42.7 shares** if she used her $3,000 and borrowed $3,000 on margin to buy Chase stock.

---

### Part 3: Calculating profit if Mary sells at $156 per share
Mary purchased 42.7 shares and paid a total of $22 in commission to buy and another $22 in commission to sell. The selling price is $156 per share. First, let's calculate the revenue from selling the shares:

\[
\text{Revenue} = 42.7 \times 156 = 6658.20
\]

The total amount spent when buying the shares was:

\[
\text{Total spent} = 6000 + 22 = 6022
\]

The total commission paid is $22 when buying and $22 when selling, so:

\[
\text{Total commission} = 22 + 22 = 44
\]

Thus, the total profit is:

\[
\text{Profit} = \text{Revenue} - \text{Total spent} - \text{Total commission}
\]
\[
\text{Profit} = 6658.20 - 6000 - 44 = 614.20
\]

### Final Answer:
Mary's total profit is **$614.20**.

---

Would you like more details or have any questions?

Here are 5 related questions:
1. What are the risks associated with buying stocks on margin?
2. How would the profit change if the stock price dropped to $130 instead of rising?
3. How does paying commissions affect overall profitability in stock trading?
4. How do margin requirements vary across different brokers?
5. What is the formula for calculating percentage return on an investment?

**Tip**: Always consider both commissions and potential price fluctuations when making investments on margin.

Mary Reid invested $3,000 and borrowed $3,000 to purchase shares in JP Morgan Chase. At the time of her investment, Chase was selling for $140 a share. If Mary paid a commission of $14, how many shares could she buy if she used only her own money and did not use margin? If Mary paid a commission of $22, how many shares could she buy if she used her $3,000 and borrowed $3,000 on margin to buy Chase stock? Assume Mary did use margin to buy her Chase stock. Also, assume she paid another $22 to sell her stock and sold the stock for $156 a share. How much profit did she make on her Chase stock investment?

Learn how to calculate the number of shares Mary can buy using $3,000, with or without margin, considering commission fees. See how to compute profit from stock sales when shares rise to $156. This problem covers arithmetic concepts and stock market calculations. Suitable for Grades 9-12.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation