Suppose you buy 400 shares of stock initially selling for $40. You borrow 25% of the necessary funds from your broker: that is, the initial margin on your purchase is 25%. You pay an interest rate of 8% on margin loans. What is the total value of 400 shares the stock you purchase? How much money do you borrow from your broker? How much to you pay for yourself? What will be your rate of return if the stock price increases to $50 after a one-year holding period? What will be your rate of return if the stock price decreases to $30 after a one year holding period?