6. You are bullish on MSFT. You purchase 100 shares of MSFT stock at the market price using $14,000 of your own money and some additional funds, which you borrow from your broker at an interest rate of 6% per year. MSFT price = $231.96

(a) What is the holding period return of this buy on margin if the price of MSFT stock increased by 15% over the next year?

(b) What if MSFT stock price increased by 2%?

(c) If the maintenance margin requirement is 35%, how far can the price of MSFT stock fall before you get a margin call?

(d) Your friend is also bullish on MSFT stock and she purchases 100 shares of MSFT stock at the market price by using $20,000 of her own money and borrow the rest from her broker at an interest rate of 6% per year also. Answer (a), (b) and (c) above for your friend.

(e) Compare your answers to all the questions above and relate to the amount of money borrowed in your and your friends investment.

7. You are bearish on Tesla. You short sell 200 shares of Tesla stock at the market price. Tesla maket price= $793.53

(a) If your brokers initial margin requirement is 50% of the value of the short position, how much in cash or securities must you put into your brokerage account?

(b) If the maintenance margin requirement is 30% of the value of the short position, how high can the price of Tesla stock rise before you get a margin call?

(c) Suppose also that at the time you close your short position in Tesla in a year, its price is at $900 per share. What is your holding period return of this particular short sale? (Assuming that you never get a margin call during that time period.)