Problem 1: Buying on a Margin (you need this information for problem two so thats why I attached it.)

Your close friend decides that now, after hearing about your Finance class from Week 4, that its time to go LONG on Tesla Why? Because, how low can it go?? It closed Friday 11/25 at $182.86, and last check at afterhours your broker assures you that you can pick up 200 shares at the after-hours spot of $182.95. Your broker is willing to open an account on margin for you given that you buy 100 shares with your own money. The rest will be on credit at 10%, compounded annually.

One year later, we (unfortunately for your friend) have come to learn that Elon Musk has all but abandoned Tesla. Ford and GM have joined forces and won a contract with the U.S. government to place 2,500 charge stations across the Midwest, South, East Coast, and West Coast interstate systems, with an additional 2,500 stations located throughout major cities across the U.S. These charging stations are not Tesla compatible. GMs electrification unit has come up with a small sedan that goes 400 miles per charge, can fully recharge within 5 minutes, and costs only $27,000 at most dealerships in North America. TSLA stock price per share at this time one year hence is $100.00.

Problem 2: Selling Short

You decide (after the same class) that while Amazon might be a good idea, owning Tesla is a really poor idea You decide to visit your broker and set up an account, with plans to short TSLA. Your broker agrees, with an initial margin set at 50%, and a maintenance margin of 25%. You short 500 shares at $182.95, the same day your friend went long One year later, the stock dropped to $100. TSLA, as we know, had not paid a dividend through the end of 2022, but in a hail Mary play, Musk issues a $2 dividend per share in May of 2023. He later tweeted that he regretted the move, and vowed to never give out another dividend, ever.

a. What was the initial amount of cash you had to infuse to set up the account?

b. What was the amount of equity (in Dollars) you had after one year?

c. What was the percentage margin on account after one year

d. What was your one-year rate of return?

e. Lets say the stock price took off (it didnt, but lets suppose it had_) How high would it have needed to go at t = 1-year for you to receive a margin call?