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GameStop is currently selling for $100. You want to take advantage of what you perceive as high expected returns on this stock by buying some
GameStop is currently selling for $100. You want to take advantage of what you perceive as high expected returns on this stock by buying some shares on margin. You have $1,500 of cash in your margin account currently and no active positions. If the minimum initial margin your broker allows is 50%, what is the maximum number of shares you can currently buy on margin? The price rises/falls by $20 in one year, and your broker charges you 8% interest on your loan at that time. What is your one-year return?
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