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Problem 3 - 2 4 ( Algo ) Suppose that XTel currently is selling at $ 3 0 per share. You buy 6 0 0

Problem 3-24(Algo)
Suppose that XTel currently is selling at $30 per share. You buy 600 shares using $13,500 of your own money, borrowing the
remainder of the purchase price from your broker. The rate on the margin loan is 6%.
Required:
a. What is the percentage increase in the net worth of your brokerage account if the price of XTel immediately changes to (i) $33; (ii) $30; (ii) $27?(Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a
minus sign. Round your answers to 2 decimal places.)
(i) Percentage Gain:
(ii) Percentage Gain:
(iii) Percentage Gain:
CORRECT ANSWERS: 13.33%,0%,-13.33%
b. If the maintenance margin is 25%, how low can XTel's price fall before you get a margin call? (Round your answer to 2 decimal places.)
Price:
WRONG ANSWER: $6,000
c. How would your answer to requirement b would change if you had financed the initial purchase with only $9,000 of your own money? (Round your answer to 2 decimal places.)
Price:
WRONG ANSWER: $12,000
d. What is the rate of return on your margined position (assuming again that you invest $13,500 of your own money) if XTel is selling after one year at (i) $33; (ii) $30; (iii) $27?(Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)
(i) Rate of Return:
(ii) Rate of Return:
(iii) Rate of Return:
WRONG ANSWERS: 13.33%,0%,-13.33%
e.Continue to assume that a year has passed. How low can XTels price fall before you get a margin call?Note: Assume maintenance margin of 25%(Round your answer to 2 decimal places.)
Price:
WRONG ANSWERS: $6,000

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