1. You decide to purchase 100 shares of Exxon Mobil in a margin account that has an initial margin of 50%. Exxon pays an annual dividend of $3.00 a share and the stock is currently trading at $50. The cost of borrowing from your broker is 5%.
2. What is your percentage return if the stock increases to $75 in 1 year?
3. If the next day after you purchase the stock, bad news is released and drops the stock to $40. Will you receive a margin call if the maintenance margin is set at 20%? Explain and Quantify.
4. What is the equity in your account if in 1 year the stock increases to $75?

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