a. KTM Malaysia Berhad's stock is currently selling for RM2.00 per share. You have invested RM100,000 in the company stock. You intend to purchase the company's stock using margin financing. You pay RM100,000 cash for the stock, and you buy it using maximum leverage. The initial margin requirement is . Ignoring taxes and commission, show in detail the impact on your margin and rate of return if the stock price (show your calculations): i. rises to RM2.20 a share, and ii. declines to RM1.80 a share. iii. If the maintenance margin is , how far can the stock price fall before a margin call? marks) b. If you anticipate the company stock to drop to RM1.50 in the very near future, using a total cash of RM100,000, how could you initiate short sale? However, the price does not really drop to RM1.50 per share, instead it rises to RM2.10. What would happen to your equity margin? Show your calculations? Is short sale of stocks permissible by Bursar Malaysia? c. Supposed you are using these four stocks to develop a market index.

Stock
	2.20		2.80
Hari-mau Berhad	6.00		6.80
Amat Mesra Berhad	3.00		3.80
Susah Hati Berhad	2.00		2.50

i. Compute the beginning and ending values for a price-weighted index and a market-value index. (4 marks) ii. Compare the percentage change in the value of each index during the year. (4 marks) iii. Explain the differences in the results between the two indexes. (4 marks)