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Using a 50% margin with initial equity of 1,000 allows trader to purchase 500 shares at $40 per share. The interest rate on debt is
Using a 50% margin with initial equity of 1,000 allows trader to purchase 500 shares at $40 per share. The interest rate on debt is 4%. Let's say the the share price increases to $45 per share after one year, what is the ROE (Return on Equity)?
a. 25%
b. 21%
c. 12.5%
d. 42%
e. 4%
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