Question
Bob invested $3,000 and was offered an option to borrow $3,000. The fund was used to pay commission fee and purchase shares in East Cost
Bob invested $3,000 and was offered an option to borrow $3,000. The fund was used to pay commission fee and purchase shares in East Cost Construction (ECC). At the time of his investment, ECC share was selling for $45 a share. a) If Bob paid a $30 commission, how many shares could he buy if he used only his own money and did not use margin? b) If Bob paid a $60 commission, how many shares could he buy if he used his $3,000 and borrowed $3,000 on margin to buy ECC shares? c) Assuming Bob did use margin, paid a $60 commission to buy ECC shares and another $60 commission to sell his stock, and sold all ECC shares bought in part b) for $52 a share, how much profit did he make on his ECC stock investment?
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