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An investor bought 200 shares of GE stock at $80 per share using 60% his own cash, and borrowed the other 40% from his broker
An investor bought 200 shares of GE stock at $80 per share using 60% his own cash, and borrowed the other 40% from his broker (Buy on Margin). The broker charges 10% APR interest on the margin loan and requires a 35% maintenance margin. The investor held the stocks for more than one year. 1) If the stocks are sold at $95 per share after one year, what was the investor's return rate on his own money? (6 points) 2) Suppose the stock price go down instead after the year. At what stock price will the investor get a margin call at 35% maintenance margin? (7 points)
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