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You are bullish on Telecom stock. The current market price is $250 per share, and you have $22,000 of your own to invest. You borrow an additional $22,000 from your broker at an interest rate of 6% per year and invest $44,000 in the stock.
a. What will be your rate of return if the price of Telecom stock goes down by 8% during the next year? The stock currently pays no dividends. (Negative value should be indicated by a minus sign. Round your answer to the nearest whole number. Omit the "%" sign in your response.)
Rate of return %
b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. (Round your answer to 2 decimal places.Omit the "$" sign in your response.)
Margin call will be made at price $ or lower
Investment A costs $10,000 today and pays back $11,500 two years from now. Investment B costs $8000 today and pays back $4500 each year for two years. If an interest rate of 5% is used, which alternative is superior?
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what is the most you would pay per share?
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