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1. Assume you purchased 1,000 shares of Motorola on January 2,2001 (a Tuesday) at $100 per share. Your broker charged acommission of 1% of the value of the trade.a. How much will you owe, and when will you owe it?b. Assume you purchased the stock on margin. Your brokerrequired a 50% initial margin and maintenance margin of 25%. Howmuch cash would you have to come up with initially?c. At what price would you face a margin call?d. Using the information provided in the prior questions, assumethe price of Motorola rises from 100 to 125, compute the returnassuming you purchased the stock for cash and assuming youpurchased the stock on margin. What have you not considered whencomputing these returns?
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