Suppose that you sell short $500$ shares of XTel, currently selling for $$40$ per share, and

give your broker $$15,000$ to establish your margin account. $($LO $3-4)$

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$)$ $$44$; $($ii$)$ $$40$; $($iii$)$ $$36?$

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 $$1$ per share. The prices in part $($a$)$ should be interpreted as ex$-$dividend, that is$,$

prices after the dividend has been paid.