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I am currently confused about these questions. please help me to figure out these questions. thanks Assume that a stock is priced at $25 and
I am currently confused about these questions. please help me to figure out these questions. thanks
Assume that a stock is priced at $25 and pays an annual dividend of $1 per share. Assume that an investor purchases the stock paying 100% cash. After one year, the investor sells the stock for $32.75 per share (after collecting the dividend). The percentage return on this investment was A. Assume that an investor purchases the stock on margin, paying S15 per share and borrowing the remainder from the brokerage firm with a 10% annual interest rate. After one year, the investor sells the stock for S32.75 per share (after collecting the dividend). The percentage return on this investment was B. If the market is efficient, will any rational investor buy stocks on margin? If so, which investors will do this? If not, why not? CStep by Step Solution
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