Question
Suppose you purchase 650 shares of stock at $50 per share with an initial cash investment of $16,250. The call money rate is 5 percent
Suppose you purchase 650 shares of stock at $50 per share with an initial cash investment of $16,250. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate. Ignore dividends.
a. Calculate your return on investment one year later if the share price is $58. Suppose instead you had purchased $16,250 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.)
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b. Calculate your return on investment one year later if the share price is $50. Suppose instead you had purchased $16,250 of stock with no margin. What would your rate of return have been now? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
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c. Calculate your return on investment one year later if the share price is $34. Suppose instead you had purchased $16,250 of stock with no margin. What would your rate of return have been now? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
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