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Use the following scenario to answer Parts (a) (c) Marlene open up a trading account with Merrill Lynch and purchases 2200 shares of Southwest Airlines (LUV) at $32.60 per share. Suppose that the initial margin percentage is 55% and that your broker charges you a margin interest rate of 6%. (a) What is the amount that Marlene must deposit into her account in order to buy 2200 shares of Southwest Airlines on margin? [4 Points] (b) Suppose that Marlene deposited the amount in Part (a) and borrowed the balance to purchase the 2200 shares of Southwest. What will be Marlenes rate of return if the price of Southwest stock rises to $37.50 by next year and Marlene sell the shares? You may ignore any expected dividend payments. [Hint: Make sure to take into account the margin interest rate in your calculations.] [8 Points] (c) How far would the price of Southwest shares have to fall before Marlene receives a margin call if the maintenance margin is 25%? Round your final answer to two decimal places. [6 Points] Use the following scenario to answer Parts (d) (e) Everon opens up a trading account with Merrill Lynch. Everon has decided to sell short 4,000 shares of American Eagle Outfitters (AEO) at a price of $14.45. Assume that the initial margin percentage is equal to 60% and the maintenance margin is equal to 30%. (d) How much would Everon have to deposit into the margin account to open this position? [2 Points] (e) At what share price will Everon receive a margin call on her short sale? Round your final answer to two decimal places. [6 Points]

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