After three years of experience managing his stock investment, Olivier is ready for the next step. Now, he aims to leverage margin activity. He opened an investment account with Empoli Investment (EI) last month. El requires an initial margin of 40% plus a maintenance margin of 30% for local investment. El also provides a foreign investment opportunity with an initial margin of 50% and a maintenance margin of 45%. a) Why does margin activity is said to be suitable only for an experienced investor? (2 marks) b) In one of his first margin transactions, Olivier purchased 1500 units of Hevid (Malaysia) Bhd. for RM2.50 per unit last month. Against his prediction, the price is now RM1.80. What is his new initial margin? Will there be a margin call? If yes, how much must he add to his equity? (6 marks) c) Also last month, Olivier invested in the New York Stock Exchange (NYSE) by purchasing 300 units of stock Zeta Inc. and 500 units of stock of Deltabay Inc. at the price of USD10.00 and USD15.00 per share respectively. Since then, the price per unit of Zeta Inc. has increased to USD12.70 while Deltabax Inc. has decreased to USD13.00. Calculate his new initial margin position for the foreign operation. Is he going to face any margin call? (Hint: calculate based on the USD) (8 marks) d) Olivier expects no dividend from his local investment, but he believes that Zeta Inc. would continue to give a dividend per share of USD0.10 while Deltabay Inc is expected to provide a dividend per share of USD0.25. The margin loan for local investment will be charged at a 5% interest cost while the foreign margin is chargeable at 9% interest per annum. Assuming no other fees, what is the profit/loss of his investment in the three investments assuming the exchange rate of RM3/1USD? (Hint: for ease of calculation, use the value of debt based on initial margin calculated on the previous questions) After three years of experience managing his stock investment, Olivier is ready for the next step. Now, he aims to leverage margin activity. He opened an investment account with Empoli Investment (EI) last month. El requires an initial margin of 40% plus a maintenance margin of 30% for local investment. El also provides a foreign investment opportunity with an initial margin of 50% and a maintenance margin of 45%. a) Why does margin activity is said to be suitable only for an experienced investor? (2 marks) b) In one of his first margin transactions, Olivier purchased 1500 units of Hevid (Malaysia) Bhd. for RM2.50 per unit last month. Against his prediction, the price is now RM1.80. What is his new initial margin? Will there be a margin call? If yes, how much must he add to his equity? (6 marks) c) Also last month, Olivier invested in the New York Stock Exchange (NYSE) by purchasing 300 units of stock Zeta Inc. and 500 units of stock of Deltabay Inc. at the price of USD10.00 and USD15.00 per share respectively. Since then, the price per unit of Zeta Inc. has increased to USD12.70 while Deltabax Inc. has decreased to USD13.00. Calculate his new initial margin position for the foreign operation. Is he going to face any margin call? (Hint: calculate based on the USD) (8 marks) d) Olivier expects no dividend from his local investment, but he believes that Zeta Inc. would continue to give a dividend per share of USD0.10 while Deltabay Inc is expected to provide a dividend per share of USD0.25. The margin loan for local investment will be charged at a 5% interest cost while the foreign margin is chargeable at 9% interest per annum. Assuming no other fees, what is the profit/loss of his investment in the three investments assuming the exchange rate of RM3/1USD? (Hint: for ease of calculation, use the value of debt based on initial margin calculated on the previous questions)