Question
1. Gurmanak bought $12,000 of Cenovus Energy (CVE) stock when it was trading for $16.00/share 6 months ago. To finance this position, he borrowed $8000,
1. Gurmanak bought $12,000 of Cenovus Energy (CVE) stock when it was trading for $16.00/share 6 months ago. To finance this position, he borrowed $8000, the maximum he could, from his broker at 6% EAR. He has just sold all his stock for $24/share. What is his annualized rate of return and what can be said of the margin requirement on his account? A) His return is 50% and his initial margin requirement was 33.333% B) His return is 144% and his initial margin was 66.666% C) His return is 144% and his maintenance margin was 33.333% D) His return is 495.78% and his initial margin was 33.333% E) His return is 66.19% and his maintenance margin was 66.666%
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