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QUESTION 2 You purchased 100 shares of common stock on margin for $50 per share. The initial margin is 50% and the stock pays no
QUESTION 2 You purchased 100 shares of common stock on margin for $50 per share. The initial margin is 50% and the stock pays no dividend. Ignore interest on margin. a. (10 points) What would your rate of return be if you sell the stock at $42 per share? b.(10 points) Assume the maintenance margin is 30%. Below what stock price level would you get a margin call? c. (5 points) In your own words. discuss the benefits and drawbacks of buying on margin
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