You are bullish on Telecom stock. The current market price is $44 per share, and you have $2,200 of your own to invest. You borrow an additional $2,200 from your broker at an interest rate of 5.5% per year and invest $4,400 in the stock.
a. What will be your rate of return if the price of Telecom stock goes up by 7% during the next year? (Ignore the expected dividend.) (Round your answer to 2 decimal places.)
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.)