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Answer ALL questions. Question 1 On 14 March 2022, Gordon Wong got a tips from his friend that the Hong Kong Bank (HKB) makes a much higher earnings than that expected by the market. The earnings announcement will be made on 15 March 2022. Believing that it is a very rare opportunity to reap a great return, Gordon engaged a margin trading position in the HKB shares with his broker. Below are the information of the margin position and the happenings after the margin position engagement: 14 March 2022 Gordon bought 10,000 shares of the HKB at $50 per share on margin. The initial and the maintenance margin requirements are both 50%. Gordon did not have any extra money to meet the margin call but he believed that it is a sure win opportunity and he was happy to make an "all-in' bet on the tips. 15 March 2022 The HKB announced a much better earnings than that expected by the market but at the same time there was news of war happened in Europe. As a result, the HKB share price dropped to $30 within minutes and stayed there for most of the day. 16 March 2022 Realizing that the war in Europe did not have a very negative impact on the Hong Kong stock market, there was a big revert in stock price and the HKB share price increased back to $60. Gordon exclaimed The world would have been kinder to me if there were no maintenance margin requirement!" Required: a) Explain why Gordon made such an exclamation by showing the margin position in these 3 days. You should support your answer with correct calculation and reasoning. (10 marks) b) What lesson can be learned from Gordon's experience? (5 marks) c) What strategy should Gordon use if he intends to keep the loss in his margin position at the most 10%? (5 marks) Answer ALL questions. Question 1 On 14 March 2022, Gordon Wong got a tips from his friend that the Hong Kong Bank (HKB) makes a much higher earnings than that expected by the market. The earnings announcement will be made on 15 March 2022. Believing that it is a very rare opportunity to reap a great return, Gordon engaged a margin trading position in the HKB shares with his broker. Below are the information of the margin position and the happenings after the margin position engagement: 14 March 2022 Gordon bought 10,000 shares of the HKB at $50 per share on margin. The initial and the maintenance margin requirements are both 50%. Gordon did not have any extra money to meet the margin call but he believed that it is a sure win opportunity and he was happy to make an "all-in' bet on the tips. 15 March 2022 The HKB announced a much better earnings than that expected by the market but at the same time there was news of war happened in Europe. As a result, the HKB share price dropped to $30 within minutes and stayed there for most of the day. 16 March 2022 Realizing that the war in Europe did not have a very negative impact on the Hong Kong stock market, there was a big revert in stock price and the HKB share price increased back to $60. Gordon exclaimed The world would have been kinder to me if there were no maintenance margin requirement!" Required: a) Explain why Gordon made such an exclamation by showing the margin position in these 3 days. You should support your answer with correct calculation and reasoning. (10 marks) b) What lesson can be learned from Gordon's experience? (5 marks) c) What strategy should Gordon use if he intends to keep the loss in his margin position at the most 10%