Make sure you have a calculator and scrap paper for the problems. A financial calculator is not required. However, a cell phone calculator may not suffice. 1. Jake buys $12,000 of Shel1 oil stock where he pays $7,000 of his own cash and borrows $5,000 on margin. The margin rate is 58. What is Jake's portfolio return (e.g. return on equity) over the next year if Shell Oil stock : a) increases by 12%; b) remains unchanged; c) declines by 12%? | +12% Return 13, 440 $5,250 8,190 6,750 Current Unchanged 12,000 5,250 -12% Return Asset 12, 000 Liability Equity 7,000 10,560 5, 250 5, 310 5, 000 17% -3.57% 24.14% Return on Equity Make sure you know how these numbers are calculated. If you' re having difficulty ask for help. Note the impact margining has on returns