Calculate the pre-tax rate of return in each of these scenarios.<\/p>
A) Buy 1,000 shares of common stock at $50 and sell at $60 one year later.<\/p>
B) Buy 1,000 shares of common stock at $50 borrowing at 50% of the amount necessary to buy it at a 2% interest rate. Sell the stock at $60 one year later paying back the loan at the same time.<\/p>
C) Buy listed options at $400 for 1,000 shares of ABC, giving you the right but not the obligation to buy the shares at $50 one year later. You exercise the option one year later when the stock price is $60.<\/p>
Explain what is going on.<\/p>", "transcribed_text": "", "related_book": { "title": "The Changing Geography Of Banking And Finance", "isbn": "1441947205, 978-1441947208", "edition": "1st Edition", "authors": "Pietro Alessandrini ,Michele Fratianni ,Alberto Zazzaro", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/2024\/03\/66050c9f889e3_94366050c9f62f22.jpg", "uri": "\/textbooks\/the-changing-geography-of-banking-and-finance-1st-edition-978-1441947208-260622", "see_more_uri": "" }, "free_related_book": { "isbn": "B00AOHF9H8", "uri": "\/textbooks\/elements-of-plane-and-spherical-trigonometry-with-its-applications-to-the-principles-of-navigation-and-nautical-astronomy-with-logarithmic-and-trigonometrical-tables-1st-edition-b00aohf9h8-132392", "name": "Elements Of Plane And Spherical Trigonometry With Its Applications To The Principles Of Navigation And Nautical Astronomy With Logarithmic And Trigonometrical Tables", "edition": "1st Edition" }, "question_posted": "2024-06-09 20:28:10", "see_more_questions_link": "\/study-help\/questions\/business-banking-2021-September-12", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/to-make-ice-a-freezer-that-is-a-reverse-carnot", "description": "To make ice, a freezer that is a reverse Carnot engine extracts 42 kJ as heat at 15oC during each cycle, with coefficient of performance 5.7. 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