Suppose the initial margin as established by Stock Market Regulators is 35%. The maintenance margin is 20%. Suppose that you have $15,000 in cash that you wish to invest in stock SYPHAX which currently sells for $60 per share. This stock does not pay dividends.

1. If you buy on margin, what is the maximum number of shares that you can purchase? Draw an assets-liabilities table for this transaction.

2. Ignoring interest expenses, at what stock price will you get a margin call?

3. Suppose that the stock price actually goes down to $45 per share over a one-year holding period.

3.1. Calculate the actual margin.

3.2. Draw the assets-liabilities table in this case. Explain and show to fix the margin account to the initial margin level. What is the return on your strategy?