(This problem combines material in Chapters 2 and 3.) You purchase a stock for $50 and sell...
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(This problem combines material in Chapters 2 and 3.) You purchase a stock for $50 and sell the stock for $70 after three years.
a) What is the annual return on your investment if you bought the stock in a cash account?
b) What is the annual return on your investment if you bought the stock on margin and the margin requirement was 60 percent?
c) If the stock paid a $1 annual dividend, prove that the annual return was not 10 percent if you bought the stock in a cash account. Do you see any similarity between this problem and Problem 13?
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