2.8

An investor buys 200 shares of stock selling at $63 per share using a margin of 63%. The stock pays annual dividends of $2.00 per share. A margin loan can be obtained at an annual interest cost of 3.5%. Determine what return on invested capital the investor will realize if the price of the stock increases to $86 within six months.

What is the annualized rate of return on this transaction? What is the six-month return on this transaction?