Question
1. You purchase 1,000 shares of Pfizer (PFE) at $35 per share by giving your broker $20,000 to establish your margin account. After a year
1. You purchase 1,000 shares of Pfizer (PFE) at $35 per share by giving your broker $20,000 to establish your margin account. After a year (t=1), PFE paid out a dividend of $2 per share. The rate on the margin loan is 8%. If you earn no interest on the funds in your margin account, what will be your rate of return if at t=1, PFE is selling at $40?
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Public Finance
Authors: Harvey S Rosen, Ted Gayer
9th International Edition
0071267883, 9780071267885
