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Suppose that xtel currently is selling at $50 per share, you buy 700 snares using $28,000 of your own money, borrowing the remainder or the
Suppose that xtel currently is selling at $50 per share, you buy 700 snares using $28,000 of your own money, borrowing the remainder or the purchase price from your broker. The rate on the margin loan is 7%. a. What is the percentage increase in the net worth of your brokerage account if the price of Xtel immediately changes to (a) $56 (b) $50: (c) $44? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) b. If the maintenance margin is 20%, how low can Xtel's price fall before you get a margin call? (Round your answer to 2 decimal places.) Price $ 12.50 c. How would your answer to requirement 2 would change if you had financed the initial purchase with only $17, 500 of your own money? (Round your answer to 2 decimal places.) Strike price $ d. What is the rate of return on your margined position (assuming again that you invest $28,000 of your own money) if Xtel is selling after one year at (a) $56: (b) $50: (c) $44? (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) e. Continue to assume that a year has passed. How low can Xtel's price fall before you get a margin call? (Round your answer to 2 decimal places.) Price $
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