Question
You are bullish on Telecom stock. The current market price is $50 per share and you have $5,000 of your own to invest. You borrow
You are bullish on Telecom stock. The current market price is $50 per share and you have
$5,000 of your own to invest. You borrow an additional $5,000 from your broker at an annual
interest rate of 8% and invest $10,000 in the stock
a. Suppose the price drops immediately after you take this position. At what price would you
receive a margin call from your broker?
b. Suppose instead that the large price drop occurs one year after you take the position. At what
price would you receive a margin call from your broker?
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Introduction To Finance Markets, Investments, And Financial Management
Authors: Ronald W. Melicher, Edgar A. Norton
17th Edition
1119561175, 978-1119561170
