1. An investor buys $8,000 worth of a stock (200 shares ) priced at $40 per share using 50% initial margin. The broker requires a 30% maintenance margin. Two weeks later the stock is selling for $25, which triggers a margin call. How much is the margin call (ignore any interest)?
A) $250
B) $300
C) $400
D) $500
2. You buy 300 shares of Microsoft on margin that are currently selling at $30 per share. You post the 50% margin required on the purchase. Your cost of borrowed funds for buying on margin is 4% per year. What will be your rate of return if after 1 year Microsoft is selling at $27? (Ignore any dividends)
A) -10%
B) -16%
C) -20%
D) -24%