Q1) You bought 100 shares of ABC common stock on margin at $50 per share. Suppose the initial margin is 50% and maintenance margin is 30%. Below stock price of __________ you would get margin call. Suppose stock pays no dividend and ignore interest on margin.
A) $35.71
B) $42.86
C) $53.57
D) $57.14
Q2) You bought 300 shares of common stock on margin for $50 per share. Initial margin is 60% and stock pays no dividend. Your rate of return would be __________ if you sell stock at $40 per share. Ignore interest on margin.
A) 33%
B) -33%
C) -44%
D) -56%
Q3) The return on risky portfolio is 15%. Risk-free rate as well as investor's borrowing rate is 10%. The standard deviation of return on risky portfolio is 20%. If standard deviation on the complete portfolio (one that includes risky and riskless assets) is 25%, expected return on the complete portfolio is __________.
A) 6.00%
B) 8.47%
C) 10.00%
D) 16.25%