How far can tesla stock to fall for you

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Suppose that Tesla Inc stock (TSLA) currently is selling at $799.5 per share. You have $1,380,000 cash in your account. You are bullish on the stock and decided to take a position using all your money. Your financial advisor at TD Bank provided you with two options to invest:

Option one: Open a TFSA account, where you can invest only all your cash to buy the shares.

Option two: Open a margin account, where you can invest with all your cash and also borrow additional amount from your broker to buy the shares. The initial margin requirement is 50%, and the minimum margin requirement is 30%. The interest rate charged on the margin loan will be 9% per year.

With both options, the commission is 50 cents per share for each transaction.

Calculate and answer:

Assume two years has passed, how far can Tesla stock to fall for you to get a margin call with option two?

Given the above calculation, briefly state the advantage and disadvantage of trading with margin

Reference no: EM133072755

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