a. Sharma purchased 400 shares of FCW Berhads stock at RM42 per share using the prevailing minimum initial margin requirement of 60%. The minimum maintenance margin was set to be 30%. Sharma held the stock for exactly eight months and sold it without any brokerage costs at the end of that period. During the eight months holding period, the stock paid RM1.20 per share in cash dividends. The broking firm was charged 8% annual interest on the margin loan.

Required:

i. Calculate the initial margin value of the transaction, the debit balance and the equity position on Sharmas transaction. (3 marks)

ii. At RM24 share price, calculate the actual margin percentage, and indicate whether Sharmas margin account would have excess equity, would be restricted or would be subject to a margin call. (4 marks)

iii. Sharma sold the entire share at RM48 at the end of the eight-month holding period. Calculate Sharmas rate of return on the FCW Berhads stock transaction. (5 marks)