Calculating rate of return

Reference no: EM1370392

You are bullish on Avusa stock. The current market price is $50 per share, and you have $5000 of your own to invest. You borrow an additional R5000 from your broker at an interest rate of 8% per year, and invest $10 000 in the stock.

1.What will be your rate of return if the price of Avusa stock goes up b 10%?

2.How far does the price of Avusa stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately.

Reference no: EM1370392

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