You open a brokerage account and purchase 200 shares of a stock at $70 per share. You borrow $7,000 from your broker to fund your stock purchase. The interest rate on the loan is 8%. The maintenance margin requirement is 30%.

1. What is the initial equity (dollar amount) in your account when you purchase the stock?

2. If the stock price falls to $50 per share in one year, what should be the percentage margin in your account?

3. Will you receive a margin call?

4. What is the rate of return on your investment?