4. (15 points) You recently graduated from Bilkent University. Your wealthy uncle gave you $15,000 as a graduation gift. Since you have taken the investment analysis course at Bilkent, you decided to invest the money in the stock market. After careful analysis, you identify Firsat Co. as a security that is overpriced in the market. The current price of Firsat Co stocks is $15 in the market. You opened a margin account at the Martingale Brokerage Firm. The broker's initial margin requirement is 50% and maintenance margin requirement is 35%. The interest rate changes to margin loans is 52%. a. Which of the following options will will you take regarding to Firsat Co. stock? Buy Firsat Co. stocks on margin, or ui Short sell the stocks of Firsat Co. b. Calculate the number of shares of Firsat Co. you can buy on margin/short sell with you graduation gift. c. Find the price at which you will get a margin call from your broker. d. Assume that a week later, you have to take a reverse position (i.e., if you purchase the stocks, you will sell them; if you short sell the stocks, you will buy them) at a price of $13.50 per share. During this week, Firsat Co. distributed a cash dividend of S0.50 per share. Find the rate of return on your investment. e. Calculate the rate of return on your investment, if you choose the other option specified in part a. 4. (15 points) You recently graduated from Bilkent University. Your wealthy uncle gave you $15,000 as a graduation gift. Since you have taken the investment analysis course at Bilkent, you decided to invest the money in the stock market. After careful analysis, you identify Firsat Co. as a security that is overpriced in the market. The current price of Firsat Co stocks is $15 in the market. You opened a margin account at the Martingale Brokerage Firm. The broker's initial margin requirement is 50% and maintenance margin requirement is 35%. The interest rate changes to margin loans is 52%. a. Which of the following options will will you take regarding to Firsat Co. stock? Buy Firsat Co. stocks on margin, or ui Short sell the stocks of Firsat Co. b. Calculate the number of shares of Firsat Co. you can buy on margin/short sell with you graduation gift. c. Find the price at which you will get a margin call from your broker. d. Assume that a week later, you have to take a reverse position (i.e., if you purchase the stocks, you will sell them; if you short sell the stocks, you will buy them) at a price of $13.50 per share. During this week, Firsat Co. distributed a cash dividend of S0.50 per share. Find the rate of return on your investment. e. Calculate the rate of return on your investment, if you choose the other option specified in part a
