QUESTION 2 (20 MARKS)

a. Pendekar purchased 300 shares of JEBAT Cos stock at RM55 per share using the prevailing minimum initial margin requirement of 50%. He held the stock for exactly four months and sold it without any brokerage costs at the end of that period. During the four month holding period, the stock paid RM1.50 per share in cash dividends. JEBAT Co was charged 9% annual interest on the margin loan. The minimum maintenance margin was 25%.

i. At RM45 share price calculate the actual margin percentage, and indicate whether Pendekars margin account would have excess equity, would be restricted or would be subject to a margin call.

ii. At RM50 sale price at the end of the four month holding period. calculate Pendekars rate of return on the JEBAT Cos stock transaction.