You are bullish on AT&T stock. The current market price is $25 per share, and you have $5,000 of…

You are bullish on AT&T stock. The current market price is $25 per share, and you have $5,000 of your own to invest. You borrow an additional $5,000 from your broker at an interest rate of 8% per year and invest $10,000 in the stock.

a. What will be your rate of return if the price of AT&T stock goes up by 10% during the next year? (Ignore the expected dividend.)

b. How far does the price of AT&T stock have to fall for you to get a margin call if the maintenance margin is 30%?

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