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What will be rate of return if the price of telecom stock

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You are bullish on Telecom stock. The current market price is $50 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker at an interest rate of 8% per year and invest $10,000 in the stock.

Problem a. What will be your rate of return if the price of Telecom stock goes up by 10% during the next year? The stock currently pays no dividends.

Problem 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

Reference no: EM133003749

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