4. Investor X short-sells 350 shares of XYZ Telecom., now selling for $60 per share. What is his maximum possible loss? *

a. $60

b. $350

c. $21,000

d. Unlimited

e. None of the above

6. You are bullish on TLP stocks, you have purchased on margin 520 shares for $36 per share. The initial margin requirement is 55%. Assume that the stock pays no dividend, what is your rate of return if you sell the stock after 1 year at $48 per share? *

a. 35.2%

b. 45.4%

c. 60.6%

d. 55.0%

e. None of the above

7. An investor short sells 350 shares of TLC Telecom that are currently selling for $28 per share. The initial margin and the maintenance margin required by the broker are 50% and 30% respectively. At what stock price will he get a margin call? Assuming that he earns no interest on the funds in his margin account, and the firm does not pay any dividends. *

a. $28.85

b. $31.71

c. $36.50

d. $34.25

e. None of the above

8. You neighbor buys $21,240 worth of Apple stocks currently selling at $118 per share. The initial margin is equal to 45% and the maintenance margin is equal to 35%. The rate on the margin loan is 6%. After 1 year, the stock pays a $0.75 per share dividend and is sold for $134 per share. What was your neighbors rate of return? *

a. 17.5%

b. 22.81%

c. 24.21%

d. 46.43%

e. None of the above