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The price of Walmart stock is currently $38.7 and you decide to buy 100 shares on margin. The inital margin is 60% and the broker's
The price of Walmart stock is currently $38.7 and you decide to buy 100 shares on margin. The inital margin is 60% and the broker's maintenance margin is 40%. The broker charges an effective interest rate of 8% on the margin loan.
1) How much money do you borrow if you borrow as much as possible?
2) After the 9 months, the stock price has changed to $35.64 and the stock has paid dividends of $1.79 per share. What is the new percentage margin in the account?
3) What is your effective annual return?
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