Suppose you want to buy a non-dividend-paying stock using a margin account. The current stock

price is $50 per share, and you have $5,000 you want to invest. You want to further borrow and

invest $5,000 in margin from the broker at an 8% rate.

a.

What will be your rate of return if the stock price goes up by 10% over the next year?

b.

Suppose the maintenance margin (the value in your account relative to the amount

borrowed) is 30%. How far can the stock fall before you get a margin call assuming the price

falls quickly enough for the margin loan rate not to matter?

***PLEASE USE EXCEL