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Question: 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.)

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 "tiny_mce_markerquot; sign in your response.)

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Category:- Basic Finance
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