You have decided to open a margin account with your broker and secure a margin loan. The specifics of the account are as follows:

• Maintenance margin is 40 %
• You are informed that if the value of your account falls below the maintenance margin, your account will be subject to a margin call

You feel that opening a margin account is a good investment strategy. You have decided to purchase 400 shares of the stock at its current price of $35 per share.

Model and analyze the following market transactions.

• Scenario 1: you did not make use of margin trading, e.g., you purchase with 100% cash equity
• Scenario2: initial margin requirement 65%
• Scenario3: initial margin requirement 55%

For each of the above scenarios (for each scenario 1, scenario 2, scenario 3) calculate and analyze the following:

• The value of the investment, debit balance, cash equity in the investment
• Part A: If the price of the stock rises by $15 to $50 per share, calculate (for each scenario 1,2,3) the capital gain (or loss) earned, return on investors equity and the new margin percentage. Calculate all these for each scenario 1,2,3.
• Part B: If the price of the stock falls by $15 to $20 per share, calculate (for each scenario 1,2,3) the capital gain (or loss) earned, return on investors equity and the new margin percentage. Calculate all these for each scenario1,2,3.
• What are the implications for you, the investor?
• For scenario 3 only, what is the lowest price per share at which the stock could sell before the investor would receive a margin call?

Use and present answer with 2 decimals