You are bullish on Telecom stock. The current market price is $100 per share, and you have
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Question:
You are bullish on Telecom stock. The current market price is $100 per share, and you have $19,000 of your own to invest. You borrow an additional $19,000 from your broker at an interest rate of 9% per year and invest $38,000 in the stock.
a.What will be your rate of return if the price of Telecom stock goes down by 7% during the next year? The stock currently pays no dividends.(Negative value should be indicated by a minus sign. Round your answer to the nearest whole number.)
b.How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately.(Round your answer to 2 decimal places.)
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