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(a) You are bullish on ABC stock with a market price of 50 and decide to invest 10,000 of your own. Your broker loans you
(a) You are bullish on ABC stock with a market price of 50 and decide to invest 10,000 of your own. Your broker loans you another 10,000 with annual interest rate of 6%, investing totally 20,000 on ABC. If price of ABC increases by 10%, how much will be your rate of return for the next year? (4 marks) Assuming a maintenance margin of 30%, how far can the price go down for you to get a margin call? (4 marks)
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