REQUIRED

a$.$ Explain the term "investment risk". $(2$ Marks$)$

b$.$ List and describe two $(2)$ types of investment risks. $(4$ Marks$)$

c$.$ Name and describe two $(2)$ measurement tools that stock analysts use to

assess the risk associated with a particular stock. $(4$ Marks$)$

d$.$ What is the name of the transaction when you borrow stock from your broker

and then sell that stock on the open market? $(2$ Marks$)$

QUESTION #$2-$ Purchasing Stock on Margin $(12$ Marks$)$

BACKGROUD

Assume that a client buys $1,000$ shares of listed ABC Company on margin at a

loan rate of $50\%.$

The security price to the investor is $$25$ per share.

Therefore, the total purchase costs shares $x$$$25$

In other words, the client puts up $$12,500$ to buy $$25,000$ of ABC shares.

The firm lends the remaining half of the money to the client.

NOTE: For margin accounts, the firm is limited to lending the client a maximum

amount equal to $50\%$ of the current value of the investment portfolio.

REQUIRED

Part a$.(3$ Marks$)$

Required: Complete the Following Chart.

Part b$.(8$ Marks$)$

Let's say $2$ months later there is a drop in the price of the shares to $$22$ per share.

Part c$.(1$ Mark$)$

What is the name given to the notice sent to the client advising of the deficiency

calculated in Part b$?$