You are bullish on Telecom stock. The current market price is $60 per share, and you have $6,000 of

Feb 3rd, 2012
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You are bullish on Telecom stock. The current market price is $60 per share, and you have $6,000 of your own to invest. You borrow an additional $6,000 from your broker at an interest rate of 6.4% per year and invest $12,000 in the stock. a. What will be your rate of return if the price of Telecom stock goes up by 10% during the next year? (Ignore the expected dividend.) (Round your answer to 2 decimal places.) b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30%? Assume the price fall happens immediately. (Round your answer to 2 decimal places.)

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