Anna and Clara are considering buying 500 shares of stock ABC each. ABC stock is currently selling for $100. Anna wants to buy the 500 ABC stocks using $30,000 of her own money and borrowing the remainder amount of the purchase from her broker. Annas broker will be charging her 8% on the margin loan. Clara wants to buy the 500 ABC stocks by paying the full amount of the purchase from her own money.

1. How much money does Clara need to pay in order to purchase the 500 ABC stocks? (1pt)

2. How much money does Anna need to borrow from her broker in order to purchase the 500 ABC

   stocks? (1pt)

3. What is Annas initial margin ratio? (2pts)

4. If the stock price declines immediately to $70, what will be Annas new margin ratio? (2pts)

5. Given that the minimum margin requirement is a 33% margin ratio. What is the maximum level

   that stock ABC price can drop into without triggering a margin call? (2pts)