Suppose that you sell short $1,000$ shares of Xtel, currently selling for $$30$ per share, and give your broker $$20,000$ to establish your

margin account.

Required:

a$.$ If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: $($i$)$

$$36$; $($ii$)$ $$30$; $($iii$)$ $$26?$ Assume that Xtel pays no dividends.

b$.$ If the maintenance margin is $25\%,$ how high can Xtel's price rise before you get a margin call?

c$.$ Redo parts $($a$)$ and $($b$),$ but now assume that Xtel also has paid a year$-$end dividend of $$2$ per share. The prices in part $($a$)$ should be

interpreted as ex$-$dividend, that is$,$ prices after the dividend has been paid.

Complete this question by entering your answers in the tabs below.

Redo parts $($a$)$ and $($b$),$ but now assume that Xtel also has paid a year$-$end dividend of $$2$ per share. The prices in part $($a$)$

should be interpreted as ex$-$dividend, that is$,$ prices after the dividend has been paid.

Note: Negative values should be indicated by a minus sign. Round your answers to $2$ decimal places.