2. (10 points) You are bullish on XYZ stock, which is currently trading at $100 per share. You have $10,000 of your own money to invest. You borrow an additional $10,000 from your broker at an annual interest rate of 10% and invest $20,000 in XYZ. a) What will be the rate of return on your equity if the price of XYZ goes up by 8% in one year? XYZ pays no dividends. 20.000 Tartat b) How far does the price of XYZ stock have to fall for you to get a margin call if the maintenance margin is 35%? Assume the price fall happens immediately after your purchase. 3.(15 points) Joe opened an account to short sell 1,000 shares of Internet Dreams Inc, at $40 per share. The initial margin requirement is 50% and Joe deposited just enough cash to satisfy the margin requirement. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $40 to $50, and the stock has paid a dividend of $2 per share. a) What is the remaining margin (in dollars) in Joe's account? b) if the maintenance margin requirement is 30, will do pet a margin call c) What is the rate of return on Joe's Investment? 4. (9 points) (a) Explain the main difference between an exchange trade fund (ETF) and an index mutual fund. (b) Explain the main difference between an open-end mutual fund and a closed-end mutual fund 2. (10 points) You are bullish on XYZ stock, which is currently trading at $100 per share. You have $10,000 of your own money to invest. You borrow an additional $10,000 from your broker at an annual interest rate of 10% and invest $20,000 in XYZ. a) What will be the rate of return on your equity if the price of XYZ goes up by 8% in one year? XYZ pays no dividends. 20.000 Tartat b) How far does the price of XYZ stock have to fall for you to get a margin call if the maintenance margin is 35%? Assume the price fall happens immediately after your purchase. 3.(15 points) Joe opened an account to short sell 1,000 shares of Internet Dreams Inc, at $40 per share. The initial margin requirement is 50% and Joe deposited just enough cash to satisfy the margin requirement. (The margin account pays no interest.) A year later, the price of Internet Dreams has risen from $40 to $50, and the stock has paid a dividend of $2 per share. a) What is the remaining margin (in dollars) in Joe's account