European Stars And Stripes (Newspaper) - September 18, 1988, Darmstadt, Hesse Page 20 the stars and stripes sunday september 18,1988 investor s guide by Bill la Little i understand about it baying mock an margin appears to be in easy Way to in exse my income. If i Bay on but gun i have to pay Only Hal the por bust Price. I As sume i Iben collect do Dunds on twice As Man Shim u i add exam ple if Xyz Stock is Trad ing at $100 Doyle share and i buy 200 shares on mar Gin i pay the broker Only $10,000,do i or dont i get the dividend from 100 shares a. You do but you Don t gel 10 keep All that dividend la have to pay All or part of it most Likely More than he dividends on 100 shares to your brokerage Nave missed one major fac Tor about margin trading inter est expense. When you buy on margin you put up Only 50 percent of he Price As you Purchase the Stock plus brokerage commission. In your example you would pay a commis Sion on zoo shares. You can do hat because you borrow the rest of the Money 110,000. In this Case through the brokerage. In order to buy Stock on margin for you the brokerage pays interest on its Bank borrowing and charges you slightly Hillier interest. Unless Xyz Stock pays a tremendously High dividend the in Terest you pay will More than off set the additional dividends you gel by buying on . If 1 buy Stock an margin what rate of interest will i pay on the Money i borrow through the Bro Ker a. Brokerages generally charge interest on debit balances Money customers owe on margin accounts at least one hair 01 1percent higher than the interest the brokerages pay the , the Call Money rate As it s known on Bank Loans to Bro Kerages secured by stocks As Collat eral has been running about 9.25to 9.375 percent. So you can expect to pay about10 percent or higher on Money you owe a brokerage. You might pay Good Deal More. Each brokerage sets its own interest . Assume 1 buy Stock on 50 per cent margin and its Market Price drops. At what Point will the broker demand More Money or worse yet sell me out a. When the Stock s Price drops one third perhaps sooner. Under new York Stock Exchange rules a brokerage must make a margin Call ask forbore collateral when the amount you would have left if Cheslock is sold and the loan from the broker is paid Falls to less than 25percent of the Stock s value. Here s an buy 110 shares at s60 a share on so percent margin. You borrow53,000 through the brokerage and have 13,000 equity in the Stock Falls to $40. You still owe the brokerage 13,000 and you have $1,000 equity exactly 25 percent of the mock s then the broker is required to make a margin Call forbore Cash or securities. If the Stock goes even a fraction lower your Stock will be sold. The loan is paid off. You get whal s left business news . Deficit report boosts Dow Market rebounds to August level new York Orpi the Stock mar Ket staged a healthy Advance last week boosted by a surprisingly favourable Trad report that for one Day wednesday allowed the Dow to recapture the2100 level for the firs time since aug. 8. The Dow Jones Industrial average which Rose 5.87 Friday closed the week at 2098.15. For the week the Blue Chi Index Rose 29.34, or 1.4 percent. After modest gains on monday an tuesday in anticipation of the july Mer Chandise Trade report the Market close sharply higher wednesday. The Dow jumped 17.60 following government report showing that the Trade deficit narrowed to j9.5 billion injury Down from a revised is 3.2 billion in june and far better than Market expectations. The Only Down Day of the week was thursday when the Dow gave Back 8,36. On Friday the Market posted a mod est Advance As the quarterly expiration of futures and options passed with a mini mum of disruption. The Dow Rose 5.87. There was a lot of random confusing action in this session,1 said Michael Metz of Oppenheimer and co., after the Friday in pc witching hour it was a Day for traders and speculators to Deal with one another. The Long term investors know by now not to get inthe Way. It s All very exotic when we pushed through 2100 on wednesday the Market appeared a Little tired said Gene Seagle director of technical research at Gruntal and co. And one could argue that on a minor basis the Market was a Little overbought so until we attract More to Tum there might be More of a problem breaking through additional resistance areas Seagle said. However Seagle added he remained confident that the Market s attempt to test the Post collapse High 2158.6 set july 5 would succeed "1 think we Are going to see 2250 bythe time of the presidential election and even reach 2500 by the end of the year Seagle Saidl if Here is a pullback prior to that it should level off at around2040-2650." Seagle said the reason for he optimism was a More favourable interest rate background and significant strength unselected issues. There Are a lot of Story Stockrum stocks and announced acquisitions work ing in this Market right now Seagle said. If we Slop looking at the indexes we see More and More individual Stock performing Broad Market indicators also posted gains on the week. The new York Stock Exchange composite Index Rose 1.95 lo152.79. Standard and poor s Soo Stock Index gained 3.81 to close the week at270.65. Advances led declines 1,096-761among the 2,154 issues traded. Big Board volume totalled 817,087,530shares, compared will 552,800,120 last week and 825,426,740 a year ago. On the nose trading floor last week Detroit Edison was the most Active Issue Down i to 14%. Kroger followed soaring 13, to 51. The Stock jumped 1 1 tuesday after the company announced that its Board was exploring a major restructuring. Us a was third shedding it to30%. At Trase to 25%. Ism slipped Phillips Petroleum Rose 2% to i9u,amid takeover rumours. Zayarc jumped 3 a to 25. The company announced lire Sale of its discount stores division Loames department stores for an estimated $800 million. Hospital corp. Of America jumped9 a to 44. On news of a possible lever aged buyout by a management group. Time inc. Rose now to i06h, on re mors of a leveraged buyout. Among the Active Blue chips this week Exxon was up a to 45 w general elec tric was up i to 43 k Avistar was off to 5 coca cola was up a to 42vi Merck was up it to 58 a and Eastma Kodak was up in to 45ft. On the american Slock Exchange the Annex Market value Index Rose 0.77, to close at 298.22, while the National association of securities dealers Index added 2.32, to end Al 383.92. Advances topped declines 417-374among 1,024 issues traded on the amex. Volume totalled 40.940,400, shares com pared with 34,894,41 0 traded a week ear Lier and 58,430.770 traded in the Sam week a year earlier Amdahl led the Macx Active Down i to 18 �4. Lorimar Tele pictures followed gaining to 14ft. Echo Bay mines Wasl Hird off it 1016v fund prices from Page 19 1/mltomll hit. 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