One year ago you bought $500,000 of shares partly funded using a margin loan. The loan size was $100,000 and the other $400,000 was your wealth or 'equity' in the share asset.

The interest rate on the margin loan was 3% pa using Interactive Brokers.

Over the year, the shares produced a net dividend yield of 4% pa and a capital gain of 2.5% pa.

Assume that all cash flows (interest payments and net dividends payments) were paid and received at the end of the year, and all rates are given as effective annual rates.

What was the total return on your wealth over the past year?

Select one:

a. 9.5%

b. 7.375%

c. 6.5%

d. 3.3981%

e. 2.125%