a. Total value of your stock purchase is $200,000 at $250 per share. Total number of shares bought is 800 shares.
Margin call is at 35% of your total equity i.e. 200000*35% = $70000 with 800 shares.
Therefore, value of one share at margin call is = $70000/800 = 87.5 . Price of HKex stock can fall upto 87.5 before you receive a margin call
b. After an year, price of stock increase by 20% i.e. 20% of 250 = $50. Therefore, value of stock is now 250 + 50 = $300.0
total value of equity is number of shares * value of stock = 800 * 300 = $240000
Total investment in one year = $100000 + $100000*(1+5%)^1 = $205000
Thus rate of return is equal to = ($240000/$205000)-1 = 0.17 = 17%
I want the full step about how to calculate part a+b, thanks. 2. You are bullish...
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