4. Up-and-coming rapper Paper Boi just released a mixed tape with some relative success. A club agreed to pay him $10,000 to show up last Saturday night and just hang out. Unfortunately, he got into a heated confrontation outside the club, culminating in a gunshot, so hes laying low for now. With some free time on his hands, hes been pursuing some finance websites. Paper Boi would like to invest the $10,000 honorarium from the club and observes that GEO Group (NYSE:GEO) is currently trading at $40.00 per share.

a) With the upcoming elections, he decides to purchase the GEO shares on margin. Using all of the club funds and the maximum allowable margin under Federal Reserve Reg T, how many shares can Paper Boi purchase?

b) If the maintenance margin is 25%, at what price will he receive a margin call?

c) Now that hes actually spent some time thinking about his investment, the elections, and reading up on GEO, he decides to short 250 shares of GEO stock using the maximum allowable margin. Explain very concisely how he would do this (including how much collateral he needs to contribute). GEO is still trading at $40 per share.

d) If the maintenance margin is 25%, at what price will he receive a margin call?

e) Compare the strategy of shorting GEO to buying GEO on margin. When should Paper Boi short and when should he buy on margin? Note your answer should be quite short.