Question
Suppose you purchase 500 shares of stock at $48 per share with an initial cash investment of $8,000. The call money rate is 5 percent
Suppose you purchase 500 shares of stock at $48 per share with an initial cash investment of $8,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate. |
a. | Calculate your return on investment one year later if the share price is $56. Suppose instead you had simply purchased $8,000 of stock with no margin. What would your rate of return have been now? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) |
Rate of return | % |
Without margin, rate of return | % |
b. | Calculate your return on investment one year later if the share price is $48. Suppose instead you had simply purchased $8,000 of stock with no margin. What would your rate of return have been now? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Omit the "%" sign in your response.) |
Rate of return | % |
Without margin, rate of return | % |
c. | Calculate your return on investment one year later if the share price is $32. Suppose instead you had simply purchased $8,000 of stock with no margin. What would your rate of return have been now? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.) |
Rate of return | % |
Without margin, rate of return | % |
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