Problem 5: Short Sell on Margin Suppose that you sell short 500 shares of XTel, currently selling for $40 per share, and give your broker $15,000 to establish your margin account. a. If you earn mo interest on the funds in your margin account, Assume that XTel pays no dividends. So what will be your rate of return after one year if XTel stock is selling at: (i) 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. (Hint: when you short a stock, you are not entitied to receive the dividend and must pay it to the lender of the borrowed shares (e.g. the broker), In the case of dividend payment, Margin = Equity / Value of Stock and try to calculate the equity value of your account in this case)