You buy 100 shares of Apple in a margin account at $150 a share The initial margin is 50% The cost of borrowing is 5% (from your broker) The stock pays a dividend of $2 a share per year The minimum maintenance requirement is 20% 1) In 1 year, the stock rises to $175 what is the percentage return on your investment? 2) Calculate the % return if you had not used margin (cash account)- why are they different? % Return (non-margin) = [(ending price stock beginning price stock) + income per share] / beginning price of stock - easiest to assume you own 1 share 3) What is your ending equity after 1 year? 4) Calculate the price at which you will receive a margin call base your calculation on the information that is present when you make the purchase hence at time t=0