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An investor purchases 100 shares of an $60 stock when the initial margin requirement is 60 percent, and the maintenance margin is 40 percent. 1)
An investor purchases 100 shares of an $60 stock when the initial margin requirement is 60 percent, and the maintenance margin is 40 percent.
1) How much cash must the investor put up initially to purchase the stock?
2) If the stock is sold for $70 after 6 months, what was the 6-month holding period return? Assume the broker charges a 5% nominal annual interest rate with semiannual compounding.
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