You are bullish on Telecom stock. The current market price is $30 per share, and you...

You are bullish on Telecom stock. The current market price is $30 per share, and you have $6,000 of your own to invest. You borrow an additional $6,000 from your broker at an interest rate of 7% per year and invest $12,000 in the stock.

a.	What will be your rate of return if the price of Telecom stock goes up by 5% during the next year? The stock currently pays no dividends. (Negative value should be indicated by a minus sign. Round your answer to the nearest whole number. Omit the "%" sign in your response.)

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.Omit the "$" sign in your response.)

Margin call will be made at price

$ or lower

rev: 03_13_2017_QC_CS-82418

References

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Expert Solution

jeff jeffy answered 2 years ago

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