An investor initially pays K6 000 towards the purchase of K10 000 worth of shares at K100 each borrowing the rest from a broker;

. Draw up the investors simple balance sheet to reflect this transaction.

(4 marks)

. Calculate the initial margin and the margin if the share price falls to K70.

(4 marks)

. Suppose the maintenance margin is 30 %. How far could the stock price fall before the investor would get a margin call? Suppose the margin is 40 %. How far can the stock price fall before the investor gets a margin call? (4 marks)