An investor buys $8,000 worth of a stock priced at $40 per share using 50% initial margin. The broker charges 6% on the margin loan and requires a 30% maintenance margin. In one year the investor gets a margin call.
Requirements:
Question 1: Calculate the price the stock must have had at the time of the margin call.
Question 2: Calculate the return the stock had at the time of the margin call.
Question 3: Calculate the return the investor had at the time of the margin call. (Be careful, the interest charge on. Please present complete computation and also provide full description.