You are bullish on Telecom stock. The current market price is $52 per share, and

Question

You are bullish on Telecom stock. The current market price is $52 per share, and you have $13,000 of your own to invest. You borrow an additional $13,000 from your broker at an interest rate of 8.2% per year and invest $26,000 in the stock. a. What will be your rate of return if the price of Telecom stock goes up by 10% during the next year? gnore the expected dividend Round your answer to 2 deci al places. Rate of return b. How ar does the price o Telecom s ock have o all for you o get a margin call the maintenance margin is 3 %?Assume the price all happens mediate . o n your answer to Stock price falls below decima paces.

Explanation / Answer

a.

rate of return will=(26000*10%-13000*8.2%)/13000=11.80%

b.

number of shares=26000/52=500

(500P-13000)/500P<30%

500P-13000<150P

350P<13000

P<13000/350
P<37.14 should be the answer

the above is answer..

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