You are bullish on Telecom stock. The current market price is $62 per share, and you have $6,200 of your own to invest. You borrow an additional $6,200 from your broker at an interest rate of 7.6% per year and invest $12,400 in the stock. a. What will be your rate of return if the price of Telecom stock goes up by 9% during the next year? (Ignore the expected dividend.) (Round your answer to 2 decimal places.) Rate of return % b. How far does the price of Telecom 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.) Stock price falls below. You are bullish on Telecom stock. The current market price is $62 per share, and you have $6,200 of your own to invest. Youborrow an additional $6,200 from your broker at an interest rate of 7.6% per year and invest $12,400 in the stock.a. What will be your rate of return if the price of Telecom stock goes up by 9% during the next year? (Ignore the expecteddividend.) (Round your answer to 2 decimal places.)Rate of return%b. How far does the price of Telecom stock have to fall for you to get a margin call if the maintenance margin is 30% ? Assumethe price fall happens immediately. (Round your answer to 2 decimal places.)Stock price falls below

A margin call is a call where the equity amount has to be raised into the account by the brokerage…

Answered: You are bullish on Telecom stock. The…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 12P

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You are bullish on Telecom stock. The current market price is $62 per share, and you have $6,200 of your own to invest. You borrow an additional $6,200 from your broker at an interest rate of 7.6% per year and invest $12,400 in the stock. a. What will be your rate of return if the price of Telecom stock goes up by 9% during the next year? (Ignore the expected dividend.) (Round your answer to 2 decimal places.) Rate of return % b. How far does the price of Telecom 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.) Stock price falls below.

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