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: $13\mathrm{.}33\%,0\%,-13\mathrm{.}33\%$

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: $13\mathrm{.}33\%,0\%,-13\mathrm{.}33\%$

e$.$Continue to assume that a year has passed. How low can XTel$$s price fall before you get a margin call?$$Note: Assume maintenance margin of $25\%($Round your answer to $2$ decimal places.$)$

Price:

WRONG ANSWERS: $$6,000$