P2.12 An investor buys 200 shares of stock selling at $80 per share using a margin of

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P2.12 An investor buys 200 shares of stock selling at $80 per share using a margin of 60%. The stock pays annual dividends of $1 per share. A margin loan can be obtained at an annual interest cost of 8%. Determine what return on invested capital the investor will realize if the price of the stock increases to $104 within six months. What is the annualized rate of return on this transaction?

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Fundamentals Of Investing

ISBN: 9780136117049

11th Edition

Authors: Lawrence J. Gitman, Michael D. Joehnk, Scott B. Smart, Scott J. Smart

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