Suppose that XTel currently is selling at $50 per share. You buy 700 shares using...
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Suppose that XTel currently is selling at $50 per share. You buy 700 shares using $28,000 of your own money, borrowing the remainder of the purchase price from your broker. The rate on the margin loan is 7%.
b. If the maintenance margin is 20%, how low can XTels price fall before you get a margin call? (Round your answer to 2 decimal places.)
c. How would your answer to requirement b would change if you had financed the initial purchase with only $17,500 of your own money? (Round your answer to 2 decimal places.)
d. What is the rate of return on your margined position (assuming again that you invest $28,000 of your own money) if XTel is selling after one year at (i) $56; (ii) $50; (iii) $44? (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.)
e. Continue to assume that a year has passed. How low can XTels price fall before you get a margin call? Note: Assume maintenance margin of 20% (Round your answer to 2 decimal places.)
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