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Tom has $10,000 in the bank deposit and would like to invest Twitter Inc. currently...

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Finance

Tom has $10,000 in the bank deposit and would like to invest Twitter Inc. currently traded at $100. He plans to purchase the stocks with 50% initial margin. Suppose Twitter does not pay dividend. Maintenance margin percentage required by the broker is 35%. Ignore the interest on the margin loan.

a) What is the total market value of Twitter stock Tom purchased?

b) How many shares of Twitter stocks can Tom purchase?

c) At what price of Twitter stock will Tom receive a margin call from the broker?

d) What is the margin percentage if the Twitter stock drops by 30%?

e) What is the rate of return on Toms investment if the Twitter stock drops by 30%?

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