You are bullish on Telecom stock. The current market price is $20 per share, and you...

You are bullish on Telecom stock. The current market price is $20 per share, and you have $2,000 of your own to invest. You borrow an additional $2,000 from your broker at an interest rate of 7.5% per year and invest $4,000 in the stock.

a. What will be your rate of return if the price of Telecom stock goes up by 9% during the next year?

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.

Expert Solution

jeff jeffy answered 2 months ago

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