Suppose that XTel currently is selling at $$40$ per share. You buy $500$ shares using

$$15,000$ of your own money, borrowing the remainder of the purchase price from your

broker. The rate on the margin loan is $8\%.($LO $3-4)$

a$.$ What is the percentage increase in the net worth of your brokerage account if

the price of XTel immediately changes to $($i$)$ $$44$; $($ii$)$ $$40$; $($iii$)$ $$36?$ What is the

relationship between your percentage return and the percentage change in the

price of XTel?

b$.$ If the maintenance margin is $25\%,$ how low can XTel$$s 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 $$10,000$ of your own money?

d$.$ What is the rate of return on your margined position $($assuming again that you invest

$$15,000$ of your own money$)$ if XTel is selling after one year at $($i$)$ $$44$; $($ii$)$ $$40$;

$($iii$)$ $$36?$ What is the relationship between your percentage return and the percentage

change in the price of XTel? Assume that XTel pays no dividends.

e$.$ Continue to assume that a year has passed. How low can XTel$$s price fall before you

get a margin call?