In what circumstances are private placements more likely to be used than public offerings?
When they have to avoid the time and cost involved in preparing public offering,
The term Public offering refers to the sale of shares of equity or other financial instruments of a corporation to raise funds for certain reasons.
Preparing a public issue is a time consuming affair. Therefore, a firm which is willing to buy securities and wishes to avoid the time and cost involved in preparing public offering, may issue shares privately.
Dée Trader opens a brokerage account and purchases 300 shares of Internet Dreams at $40 per share. She borrows $4,000 from her broker to help pay for the purchase. The interest rate on the loan is 8%.
a. What is the margin in Dée’s account when she first purchases the stock?
b. If the share price falls to $30 per share by the end of the year, what is the remaining margin in her account? If the maintenance margin requirement is 30%, will she receive a margin call?
c. What is the rate of return on her investment?
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