lEu'll.IESTIt'..'ihl 2 Problem 2 Margin [34 Points) 2A. The current market price for XYZ is $26 per share. Initial margin is 50%, maintenance margin is 35% and margin interest is 1.75% per year. XYZ pays annual cash dividends of $1 .10 per share. 2A1) You believe the stock price will increase over the next year and wish to trade exactly one round lot. What trade should you make [2 points)? How much margin would you have to post to your account [4 points)? At what price would you receive a margin call [7' points)? 2A2) Suppose you are com and the stock rises to $32 per share at the end of the year. What is your percentage return on equity for this trade [4 points)? 2.3. The current market price for ABC: is $45 per share. Initial margin is 50%, maintenance margin is 35% and there is no margin interest. ABC pays annual cash dividends of $2.15 per share. 2.5.1} You believe the stock price will decrease over the next year and wish to trade exactly one round lot. What trade should you make [2 points]? How much margin would you have to post to your account (4 points}? At what price would you receive a margin call [7 points}? 2.5.2} Suppose you are correct and the stock falls to $36 per share at the end of the year. What is your percentage return on equity for this trade [4 points)?