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You purchased 300 shares of common stock on margin for $60 per share. The initial margin is 60% and the stock pays no dividend. What
You purchased 300 shares of common stock on margin for $60 per share. The initial margin is 60% and the stock pays no dividend. What would your rate of return be if you sell the stock at $45 per share? Ignore interest on margin. Do the same question again when the interest on margin is now 10% during the investment horizon. At what stock price the margin call will be triggered? Use the maintenance margin of 40%. Do the same analysis if you did a short sell on the same 300 shares of the same stock.
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