You borrowed 250 shares of Doggie Treats Inc., stock for short sale at $20 per share. You deposit cash for the 50% initial margin required for the short sale. Your broker requires a 25% maintenance margin and you earn no interest on your deposit in your margin account. Assume at the end of first year, Doggie Treats Inc. will pay a year-end dividend of $0.6 per share.

1) After the year-end dividend is paid, if stock price drops to $18, what will be the return rate on your deposit? (6 points)

2) At what stock price (after year-end dividend is paid) will you get a margin call for the 25% maintenance margin? (7 points)

3) At what stock price (after year-end dividend is paid) will the return rate be 50% on your own deposit? Hint: how much would be your equity after 50% increase from the initial deposit? (6 points)