The standard deviation of return on investment A is 26%, while the standard deviation of return on investment B is 21%. If the covariance of returns on A and B is 0.003, the correlation coefficient between the returns on A and B is __________.
You are bullish on Telecom stock. The current market price is $52 per share, and you have $13,000 of your own to invest. You borrow an additional $13,000 from your broker at an interest rate of 8.2% per year and invest $26,000 in the stock.
Required:
a. What will be your rate of return if the price of Telecom stock goes up by 10% during the next year?
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.
