Assume the investor buys 100 shares of stock for $10 a share and sells it for $14. Also, assume the margin requirement is 60%, the commission rate is 5% of the purchase or sale price, the interest rate is 10% and the stock pays a dividend of $1.00 a share.

What is your rate of return on the stock if it is:

a. a cash purchase?

b. a margin purchase?