Suppose SLU stock is selling for $75 per share. At this price, you believe the stock is undervalued. Thus, you decide to buy as much SLU stock as possible using margin and the $7500 cash in the brokerage account. Assume an initial margin requirement of 60% and a maintenance margin requirement of 40%.

1) How many shares of SLU stock can you buy? (assume you cannot buy fractions of a share thus, be careful how you round your answer)

2) At what price would you receive a margin call?

3) Assume the stock price falls to $45 per share and you receive a margin call. By how much would you have to pay down the loan to get your margin back to the initial margin requirement of 60%? (Ignore interest on the loan)

4) Instead of paying down the loan as in part 3, you decide to liquidate just enough of your position to pay down the loan to get the margin back to 60%. How many shares must you sell?