Assume that a stock is priced at $55 and pays an annual dividend of $2.00 per share.

A. Assume that an investor purchases the stock paying $55 (100%) in cash. After one year, the investor sells the stock for $43 per share (after collecting the $2 dividend). The percentage return on this investment was _____.

B. Assume that an investor purchases the stock for $55 on margin, paying $30 per share in cash, and borrowing the remainder from the brokerage firm, with an 8% annual interest rate. After one year, the investor sells the stock for $43 per share (after collecting the $2 dividend). The percentage return on this investment was ____.

C. Explain why some rational investors might purchase stock on margin, ignoring the pattern revealed by your answers to Parts A and B.