The amount of debt is 10,000 and there are 500 shares purchase. The shares were purchased at $40 per share. The maintenance margin is 30%. Lets say the share price decrease to $30 per share after year 1.

1. The return on equity is -54%

2. A margin call will be issued

3. Leverage has made the ROE (Return on Equity) worse than a straight cash purpose

a. 1

b. 1 & 3

c. 1,2, & 3

d. 2 & 3

e. 1 & 3