You are bullish on telecom stock the current market price, Ask an Expert

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You are bullish on Telecom stock. The current market price is $90 per share, and you have $13,500 of your own to invest. You borrow an additional $13,500 from your broker at an interest rate of 7.8% per year and invest $27,000 in the stock.

a) What will be your rate of return if the price of Telecom stock goes up by 10% during the next year? (Ignore the expected dividend.)

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.

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Financial Management, Finance

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