Question: The maintenance margin is 3 0 % . Nancy purchases $ 4 0 , 0 0 0 worth of IBM stocks. She pays $ 2

The maintenance margin is 30%. Nancy purchases $40,000 worth of IBM stocks. She pays
$24,000 cash and borrows $16,000 from her broker. The broker charges 5% annual interest rate
on the call loan. (20 points)
(a) What is the margin on her account?
(b) One year later, the value of IBM stocks increases to $50,000. Will Nancy receive a margin call
or not?
(c) What is the net rate of return on the investment?

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