Problem $3-18($Algo$)$

You are bullish on Telecom stock. The current market price is $$44$ per share, and you have $$2,200$ of your own to invest. You borrow

an additional $$2,200$ from your broker at an interest rate of $5\mathrm{.}5\%$ per year and invest $$4,400$ in the stock.

Required:

a$.$ What will be your rate of return if the price of Telecom stock goes up by $7\%$ during the next year? $($Ignore the expected dividend.$)$

$($Round your answer to $2$ decimal places.$)$

Rate of return

b$.$ How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is $30\%?$ Assume the price

fall happens immediately. $($Round your answer to $2$ decimal places.$)$

Stock price falls below