Suppose that Xtel currently is selling at $$44$ per share. You buy $500$ shares using $$18,000$ of your own money,

borrowing the remainder of the purchase price from your broker. The rate on the margin loan is $7\%.$

Required:

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

changes to: $($i$)$ $$50\mathrm{.}60$; $($ii$)$ $$44$; $($iii$)$ $$37\mathrm{.}40?$ 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 $$11,000$ of your own

money?

d$.$ What is the rate of return on your margined position $($assuming again that you invest $$18,000$ of your own money$)$

if Xtel is selling after $1$ year at: $($i$)$ $$50\mathrm{.}60$; $($ii$)$ $$44$; $($iii$)$ $$37\mathrm{.}40?$ 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?

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