Question
Lei decides to buy on margin 39 shares of RFY, which are selling for $80 per share. The initial margin requirement is 40% and the
Lei decides to buy on margin 39 shares of RFY, which are selling for $80 per share. The initial margin requirement is 40% and the maintenance margin is 20%. Lei decides to use the maximum leverage possible (i.e. largest loan possible with these initial and maintenance margins). The interest rate on the loan is an APR of 3% with a daily compounding period. If after exactly 11 days the stock price falls to $72.57 and Lei sells the stock, which answer below is closest to Leis holding period return? For simplicity, please ignore transaction costs
a. -12.29%
b. -23.35%
c. -27.72%
d. -34.07%
e. -29.45%
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