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5. Suppose that Intel is currently selling at S40 per share. You buy 500 shares, using $15,000 of your own money and borrow the remainder
5. Suppose that Intel is currently selling at S40 per share. You buy 500 shares, using $15,000 of your own money and borrow the remainder of the purchase price from your broker. Ignore the rate of the margin loan. a. What is the percentage increase in the net worth of your brokerage account if the price of Intel immediately changes to i) S44; ii) S40; iii) $36? Compare your percentage return resulting from buying on margin to your percentage return from buying without borrowing money. Explain the resulting relationship If the maintenance margin is 25 percent, how low can Intel's price fall before you get a margin call? How would the answer change in part c) if you had financed the initial purchase with only $10,000 of your own money? b. c. d
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