a) Your client is considering investment in one of the 2 assets: Stock A, and Stock B. Probability distribution of returns on Stock A and B are given in the following table. You may assume that the risk-free interest rate is 5% per annum.

State	Probability	Stock A	Stock B
1	20%	10%	50%
2	30%	15%	25%
3	30%	20%	15%
4	20%	25%	-20%

b) Suppose you are bearish on BHP and decide to sell short 100 shares at the current market price of $40 per share. If the brokers initial margin requirement is 60% of the value of the short position and the maintenance margin is 30%.

1) If the price of BHP immediately changes to $55, will you receive a marginal call? If so, please calculate the additional margin you need to deposit in the account (2 marks)

2) How high can BHPs price increase before you get a margin call? (2 marks)