Answer:
A. 38%
B. NO
C. -150%
Explanation:
A.Calculation for What is the remaining margin in the account
Remaining margin=(1,000 shares*$40 per share*50%) /[(1,000 shares*$50 per share )+ ($2 per share*1,000)]
Remaining margin=$20,000/($50,000+$2,000)
Remaining margin=$20,000/$52,000
Remaining margin=0.38*100
Remaining margin=38%
Therefore the remaining margin in the account will be 38%
B. In a situation where the maintenance margin requirement is 30 percent, Old Economy will NOT receive a margin call reason been that based on the above Calculation the margin is 38% which means that it is abovethe maintenance margin requirement of 30%.
C. Calculation for What is the rate of return on the investment
Rate of return=[(1,000 shares*$40 per share)-(1,000 shares*$50 per share )] -(1,000 shares*$40 per share*50%) ÷(1,000 shares*$40 per share*50%)
Rate of return=($40,000-$50,000) -$20,000 ÷ $20,000
Rate of return = (-$10,000 -$20,000)/$20,000
Rate of return =-$30,000/$20,000
Rate of return = -1.5*100
Rate of return = -150%
Therefore rate of return on the investment will be -150%
