What percent change in price in amazon

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Suppose an investor decides to buy on margin 2000 shares of Amazon.com stock currently trading at $15 per share. The broker has a 50 percent initial minimum margin requirement and a 35 percent minimum maintenance margin requirement. The investor invests the minimum margin required.

a. What percent change in price in Amazon.com's stock price will trigger a margin call? Ignore any interest the broker may charge on the margin loan and transaction costs.

b. What is the margin % if Amazon's stock price increases to $18? Ignore any interest the broker may charge on the margin loan.

c. What is the investor's return if Amazon's stock price is $18 after one year and the broker charges 7% interest on the margin loan? Ignore transaction costs, but assume that the 7% interest is an APR, which compounded daily with a 365-day year.

Reference no: EM132801978

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