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 braker. The rate of margin loan is 8%.

A) What is the percentage increase in the net worth of your brokerage account if the price of XTel immediately changes to ($44) ($40) ($36)? What is the relationship between your percentage return and the precentage 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 ($44) ($40) ($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 long can XTel's price rise before you get a margin call?