2. Miss Good wants to buy BAD stock, which is selling for $5 per share. She can buy on margin. The initial margin requirement is 40%, and the maintenance margin is 30%.

(a) Miss Good has $2,000 in hand. If she decides NOT to buy on margin; that is, she wants to buy using only her own funds. Then what is the total shares she can buy? If the price increases to $6 per share, whats the rate of return? If the price decreases to $4 per share, whats the rate of return?

(b) If Miss Good decides to buy on margin, and she want to buy 500 shares. Then how much she needs to deposit to her margin account?

(c) Miss Good buys 500 shares, and the funds in her margin account just meet the initial margin requirement. The price decreases to $4. Whats the rate of return? Will she receive a margin call?

(d) If the price decreases to $3.5, will Miss Good receive a margin call? If she does receive a margin call, but she does nothing (because she is traveling to the Moon). Then how many shares should the broker sell to keep the margin above the maintenance margin?