1. Assume that you purchase 400 shares of XYZ stock on margin for $40 per share. If the initial margin is 50% and the maintenance margin is 30% :

a-) What is the price that will trigger a margin call?

*** Assume that the price dropped to $25 per share and your broker wants you to bring the margin back up to 50% :

b-) How much cash do you have to pay to meet the margin call?

c-) How many shares of XYZ do you have to sell to meet the same margin call?

d-) Assume the margin call never happened. If you can sell them for $56 per share one year later and your broker is charging 10% annual interest on the loan, what is the rate of return on this investment?