You give your broker $$10,000$ to establish your margin account.

i$)$ Suppose that you borrow $$10,000$ on margin to buy shares in Disney which is now selling for

$$40$ per share. What will be your rate of return after one year if Disney share is selling at $$44?$

Assume that Disney has paid a year$-$end dividend of $$1$ per share and you pay an annual interest

of $8\%$ on your margin loan. If the maintenance margin is $35\%,$ how low can the price of Disney

fall before you receive a margin call?

ii$)$ Suppose that you sell short $500$ shares of Disney at $$40$ per share, what will be your rate of

return after one year if Disney share is selling at $$44?$ Assume that Disney has paid a year$-$end

dividend of $$1$ per share and you earn no interest on the funds in your margin account. If the

maintenance margin is $35\%,$ how high can the price of Disney rise before you get a margin

call?