Question: Buying on Margin The maintenance margin is 30%. Nancy purchases $10,000 of IBM stocks. She pays $6,000 cash and borrows $4,000 from her broker. The

Buying on Margin

The maintenance margin is 30%. Nancy purchases $10,000 of IBM stocks. She pays $6,000 cash and borrows $4,000 from her broker. The broker charges a 10% annual interest rate on the call loan. (30 points)

(a) What is the margin on her account? (b) One year later, the value of IBM stocks decrease to $6,000. Will the

investor receive a margin call or not? (c) What is the rate of return on the investment?

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