You are bullish on Google stock. The current market price is $52
per share, and you have $13,000 of your own to invest. You borrow
an additional $13,000 from your broker at an interest rate of 8.2%
per year and invest $26,000 in the stock.
a. What will be your rate of return if the price of Google 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 Google 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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