In: Finance
Suppose that Xtel currently is selling at $54 per share. You buy 450 shares using $10,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 7%.
If the maintenance margin is 25%, how low can Xtel’s price fall before you get a margin call? (Round your answer to 2 decimal places.)
How would your answer to (b) change if you had financed the initial purchase with only $12,150 of your own money? (Round your answer to 2 decimal places.)
Continue to assume that a year has passed. How low can Xtel’s price fall before you get a margin call? (Round your answer to 2 decimal places.)