Q1 Suppose that you sell short 200 shares of Weston (WN), currently selling for $80 per share, and give your broker $10000 to establish your margin account.

a. If you earn no interest on the funds in your margin account, what will be your rate of return after one year if WN stock is selling at (i) $85; (ii) $80; (iii) $75? Assume that WN pays no dividends. (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) Rate of return ______%

(ii) Rate of return _______%

(iii) Rate of return _______%

b. If the minimum margin is 25%, how high can WNs price rise before you get a margin call? (Round your answer to 2 decimal places. Omit $ sign in your response.)

Margin call will be made at price $ __________ or higher

c. Redo parts (a) and (b), now assuming that WNs dividend (paid at year-end) is $1 per share. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places. Omit $ sign in your response.)

(i) Rate of return ______%

(ii) Rate of return ______%

(iii) Rate of return_________ %

Margin call will be made at price $________ or higher

Q2

Suppose that Weston (WN) currently is selling at $56 per share. You buy 500 shares, using $20,000 of your own money and borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 6%.

a. What is the percentage increase in the net worth of your brokerage account if the price of WN immediately changes to (i) $58.80; (ii) $56; (iii) $53.20? (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	_____%

b. If the minimum margin is 25%, how low can WNs price fall before you get a margin call? (Round your answer to 2 decimal places. Omit $ sign in your response.)

Margin call will be made at price $ ________

c. How would your answer to (b) change if you had financed the initial purchase with only $14,000 of your own money? (Round your answer to 2 decimal places. Omit $ sign in your response.)

Margin call will be made at price $ _________

d. What is the rate of return on your margined position (assuming again that you invest $20,000 of your own money) if WN is selling after one year at (i) $58.80; (ii) $56; (iii) $53.20? Assume that WN pays no dividends. (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	_____%

e. Continue to assume that a year has passed. How low can WN price fall before you get a margin call? (Round your answer to 2 decimal places. Omit $ sign in your response.)

Margin call will be made at price $ _________