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Suppose that XTel currently is selling at $50 per share. You buy 500 shares using $15,000 of your own money, borrowing the remainder of the
Suppose that XTel currently is selling at $50 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 10%. What is the percentage increase in the net worth of your brokerage account if the price of XTel immediately changes to (i) $55; (ii) $50; (iii) $45?
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