You are bullish on Tesla. The current market price is $600. You have $30,000 of your...

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You are bullish on Tesla. The current market price is $600. You have $30,000 of your own and you borrow $30,000 from your broker at an interest rate of 5% per year and invest $60,000 in the stock. a. What will be your rate of return if Tesla goes up by 30% in the next year? b. Now suppose Tesla stock price starts falling as soon as you buy it, at what point would you get a margin call from your broker if the maintenance margin is 30%? You are bullish on Tesla. The current market price is $600. You have $30,000 of your own and you borrow $30,000 from your broker at an interest rate of 5% per year and invest $60,000 in the stock. a. What will be your rate of return if Tesla goes up by 30% in the next year? b. Now suppose Tesla stock price starts falling as soon as you buy it, at what point would you get a margin call from your broker if the maintenance margin is 30%?

Answer rating: 100% (QA)

ANSWER a If Tesla stock goes up by 30 in the next year your investment would increase to 78000 60000 ... View the full answer