Suppose the Xenon (XO) currently is selling at $90 per share. You buy 300 shares, using $20,000 of your own money, and borrow the remainder of the purchase price from your broker. The rate on the margin loan is 6 percent

a) What is the rate of return on your margined position (assuming again that you invest $15,000 of your own money) if XO is selling after one year at (1) $98; (2) $90; (3) $82? What is the relationship between your percentage return and the percentage change in the price of XO? Assume that XO pays no dividends.

b) . Continue to assume that a year has passed. How low can XO price fall before you get a margin call?