You are bullish on Telecom stock. The current market price is $60 per share, and you...
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You are bullish on Telecom stock. The current market price is $60 per share, and you have $5,700 of your own to invest. You borrow an additional $5,700 from your broker at an interest rate of 6% per year and invest $11,400 in the stock. Required: a. What will be your rate of return if the price of Telecom stock goes up by 15% during the next year? The stock currently pays no dividends. b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 25% ? Assume the price fall happens immediately. You are bullish on Telecom stock. The current market price is $60 per share, and you have $5,700 of your own to invest. You borrow an additional $5,700 from your broker at an interest rate of 6% per year and invest $11,400 in the stock. Required: a. What will be your rate of return if the price of Telecom stock goes up by 15% during the next year? The stock currently pays no dividends. b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 25% ? Assume the price fall happens immediately.
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