Hot Shot Inc. stock sells today for $30/share. You buy 1000 shares with your own money. The stock

doesn?t pay a dividend.

a. What are the rates of return if the price immediately goes to $40, to $32, to $20, to $14?

b. Instead of buying all the shares with your own money, you borrow $10000 to finance the

purchase of 1000 shares at $30. What is your initial margin?

c. What are your rates of return on your portfolio with borrowing if the price immediately goes

to $40, to $32, to $20, to $14?

d. What do these latter results suggest relative to your rates of return the portfolio without

borrowing?

e. With borrowing, how much must the share price fall from $30 before you must add cash to

meet your maintenance margin of 30%?

Hot Shot Inc. stock sells today for $30/share. You buy 1000 shares with your own money. The stock doesn't pay a dividend. a. What are the rates of return if the price immediately goes to $40, to $32, to $20, to $14? b. Instead of buying all the shares with your own money, you borrow $10000 to finance the purchase of 1000 shares at $30. What is your initial margin? c. What are your rates of return on your portfolio with borrowing if the price immediately goes to $40, to $32, to $20, to $14? d. What do these latter results suggest relative to your rates of return the portfolio without borrowing? e. With borrowing, how much must the share price fall from $30 before you must add cash to meet your maintenance margin of 30%