You are bullish on Telecom stock. The current market price is $80 per share, and you...

You are bullish on Telecom stock. The current market price is $80 per share, and you have $8,000 of your own to invest. You borrow an additional $8,000 from your broker at an interest rate of 9.0% per year and invest $16,000 in the stock.

a.	What will be your rate of return if the price of Telecom stock goes up by 11% during the next year? (Ignore the expected dividend.) (Round your answer to 2 decimal places.)

Rate of return

%

b.	How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. (Round your answer to 2 decimal places.)

Stock price falls below

$

Expert Solution

jeff jeffy answered 11 months ago

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