Identify the Industry$-$Analysis of Financial Statement Data By: Graeme Rankine

Suppose that Xtel currently is selling at $$20$ per share. You buy $1,000$ shares using $$15,000$ of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is $8\%.$ a$.$ What is the percentage increase in the net worth of your brokerage account if the price of Xtel immediately changes to: $($i$)$ $$22$; $($ii$)$ $$20$; $($iii$)\text{'}$$$18?$ What is the relationship between your percentage return and the percentage change in the price of Xtel? b$.$ It the maintenance margin is $25\%,$ how low can Xtel's price fall before you get a margin call? c$.$ How would your answer to b$)$ change if you had financed the initial purchase with only $$10,000$ of your own money? d$.$ What is the rate of return on your margined position $($assuming again that you invest $$15,000$ of your own money$)$ if Xtel is selling after $1$ year at: $($i$)$ $$22$; $($ii$)$ $$20$; $($iii$)$ $$18?$ What is the relationship between your percentage return and the percentage change in the price of Xtel? Assume that Xtel pays no dividends. e$.$ Continue to assume that a year has passed. How low can Xtel's price fall before you get a margin call? Suppose that you sell short $1,000$ shares of Xtel, currently selling for $$20$ per share, and give your broker $$15,000$ to establish your margin account. a$.$ If you earn no interest on the funds in your margin account, what will be your rate of return after one year if Xtel stock is selling at: $($i$)$ $$22$; $($ii$)$ $$20$; $($iii$)$ $$18?$ Assume that Xtel pays no dividends. b$.$ If the maintenance margin is $25\%,$ how high can Xtel's price rise before you get a margin call? c$.$ Redo parts $($a$)$ and $($b$),$ but now assume that Xtel also has paid a year$-$end dividend of $$1$ per share. The prices in part $($a$)$ should be interpreted as ex$-$dividend, that is$,$ prices after the dividend has been paid.