How far does the price or telecom stock have to fall for you

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Reference no: EM131989245

You are bullish on Telecom stock. The current market price is $10 per share and you have $1,000 or your own to invest. You borrow an additional $1,000 from your broker at an interest rate or 8.5% per year and invest $2,000 in the stock.

a. What will be your rate of return it me price of Telecom stock goes up by 10% during the next year? (Ignore the expected dividend) Rate or return %

b. How far does the price or Telecom stock have to fall for you to get a margin call it the maintenance margin is 30%? Assume the price fall happens immediately. Stock price rails below $

Reference no: EM131989245

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