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Current market price of a share is 40. You have 4000 of your own and have a possibility to borrow an additional 4000 from your
Current market price of a share is 40. You have 4000 of your own and have a possibility to borrow an additional 4000 from your broker at an interest rate of 8% p.a. a) What would be the rate of return if you invest all 8000 in the stock and its price goes up by 10% during the next year? (suppose there were no dividends). b) Suppose now that your forecast for the stock price appeared to be wrong and it falls down right after you bought it. What is the minimum price of the stock if your brokers maintenance margin is 30%?
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