Clive is a Lawyer in his 40s working in the law courts in Kinston, Jamaica. Pearline has recently left school and started work as a junior office clerk. Clive has worked and saved for many years and is now a wealthy person. Pearline is just starting out and has had to take a small loan from the bank. She has many essential purchases to make, such as the bus fare to work and smart clothes for the office. Because Clive has a high income he is able to save money and spend on luxuries for himself and his family, such as a large car and expensive holidays. As a high earner he pays income tax at a higher percentage in the dollar than Pearline. Clive’s and Pearline’s spending is in some ways influenced by their tastes. For example, Clive’s taste in clothes is a little more old-fashioned than Pearline’s. 1 How do Clive’s and Pearline’s income affect their spending? (4 marks) 2. Who is able to save more and why? (3 marks) 3. How might Clive’s or Pearline’s tastes change? What would be the effect on their spending? (4 marks) 4. If Clive’s rate of income tax increased, what might be the impact on his spending? (2 marks)

Suppose that xtel currently is selling at $40 per share. you buy 500 shares using $15,000 of your own money, borrowing the remainder of the purchase price from your broker. the rate on the margin loan is 8%. a. what is the percentage increase in the net worth of your brokerage account if the price of xtel immediately changes to (a) $44; (b) $40; (c) $36? (leave no cells blank - be certain to enter "0" wherever required. negative values should be indicated by a minus sign. round your answers to 2 decimal places.) b. if the maintenance margin is 25%, how low can xtel’s price fall before you get a margin call? (round your answer to 2 decimal places.) c. how would your answer to requirement 2 would change if you had financed the initial purchase with only $10,000 of your own money? (round your answer to 2 decimal places.) d. what is the rate of return on your margined position (assuming again that you invest $15,000 of your own money) if xtel is selling after one year at (a) $44; (b) $40; (c) $36? (negative values should be indicated by a minus sign. round your answers to 2 decimal places.) e. continue to assume that a year has passed. how low can xtel’s price fall before you get a margin call? (round your answer to 2 decimal places.)