Calculation including the cost of interest

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Reference no: EM13805961

You are bullish on Telecom stock. The current market price is $40 per share, and you have $10,000 to invest. If the margin limit is 50% and you borrow the maximum from your broker at 4% interest, and invest everything in Telecom,

(a) what will your return be if you hold the stock for a year and the price goes up to $50? Show your calculation including the cost of interest

(b) how far does the price have to fall for you to have a margin call if the maintenance margin is 30%? Show your calculation.

Reference no: EM13805961

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