Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You borrow $25,000 and buy 1000 shares of Facebook at $50 per share on margin. The interest on the loan is 5%. One year from

You borrow $25,000 and buy 1000 shares of Facebook at $50 per share on margin. The interest on the loan is 5%. One year from now the price is $51.25. Assume no dividends are paid. Calculate your rate of return and the final margin %. 1. rate of return=0%, final margin=48.8% 2. rate of return=0%, final margin=50% 3. rate of return=-5%, final margin=48.8% 4. rate of return=-5%, final margin=50% 5. None of the above

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Analysis And Valuation Using Financial Statements Text And Cases

Authors: Krishna G. Palepu, Paul M. Healy, Victor L Bernard

3rd Edition

0324118945, 9780324118940

More Books

Students also viewed these Finance questions

Question

1. Have a 2-week arrangement; then evaluate.

Answered: 1 week ago