Suppose that airnz currently is selling at $165 per share. You buy 400 shares using $2,5000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 5%.

a. What is the percentage increase in the net worth of your brokerage account if the price of airnz immediately changes to (i) $170; (ii) $180; (iii) $200?

What is the relationship between your percentage return and the percentage change in the price of airnz?

b. If the maintenance margin is 25%, how low can the airnz price fall before you get a margin call?

c. How would your answer to (b) change if you had financed the initial purchase with only $20,000 of your own money?