Assume you start with $1,200 in your margin approved brokerage account, with a 50 percent initial margin requirement (because your broker has also contributed $1,200), and a 30 percent margin maintenance requirement.

a) Assume you want to purchase 200 shares of ABC Inc. for $12 each. Explain how you'll be able to accomplish so with only $1,200 in your bank account.

b) Assume ABC Inc.'s stock climbs to $20 in the next month. You sell your stock and repay the broker for the margin borrowing. Make a profit calculation. For the sake of simplicity, assume there are no transaction fees.

c) Determine the percent return on your b) investment.

d) Now compute the rate of return on this investment if you had purchased $1,200 worth of ABC Inc instead of using the margin account.

e) Explain why the rates of return in parts c) and d) differ in one phrase.