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2. Suppose you purchase 500 shares of stock at $48 per share with an initial cash investment of $8,000. If your broker requires a 30%
2. Suppose you purchase 500 shares of stock at $48 per share with an initial cash investment of $8,000. If your broker requires a 30% maintenance margin, at what share price will you be subject to a margin call? Suppose the call money rate is 5% and you are charged with a 1.5% premium over this rate. Calculate your return on investment if the share price is $56 per share in 5 months. What is the effective annual return rate if you sell the shares at $56 per share in 5 months?
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