Luis Gibson opens a brokerage account and buys 100 shares of ABC Company at $50 per share. He borrows $1000 from his broker to help pay for the purchase. The interest on the loan is 5%.

a) What is the margin in Luiss account when he first purchased the stock?

b) If the share price falls to $30 per share by the end of the year, what is the margin in his account? If the maintenance margin is 40%, will he receive a margin call?

c) What is the rate of return on his investment?