Question
An investor buys $16,000 worth of a stock priced at $20 per share using 60% initial margin. The broker charges 8% on the margin loan
An investor buys $16,000 worth of a stock priced at $20 per share using 60% initial margin. The broker charges 8% on the margin loan and requires a 35% maintenance margin. The stock pays a $0.50 per share dividend in one year and then the stock is sold at $23 per share. What was the investor's rate of return?
A.17.50%
B.19.67%
C.23.83%
D.25.75%
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Financial Management Theory and Practice
Authors: Eugene F. Brigham, Michael C. Ehrhardt
16th edition
1337902608, 978-1337902601
