The leverage ratio of a margin investment is the value of the asset divided by the value of the equity position. For example, an investor who satisfies an initial margin requirement of 50% equity has a 2-to- 1 leverage ratio so that a 10% increase (decrease) in the price of the asset results in a 20% increase (decrease) in the investor's equity amount.

Given the following information: Shares purchased 1 ,000 Purchase price per share $100 Annual dividend per share $2.00 Initial margin requirement 40% Call money rate 4% Commission per share $0.05 Stock price after one year $110

Calculate (1) the leverage ratio and (2) the investor's return on the margin transaction (return on equity) if the stock is sold at the end of one year.