Question
You bought 400 shares of White stocks initially selling at Php 50 with an initial margin on your purchase price of 50%. You borrowed the
You bought 400 shares of White stocks initially selling at Php 50 with an initial margin on your purchase price of 50%. You borrowed the remainder from your broker with an interest rate on margin loans at 8%. White stocks are giving dividends at Php 0.6 per share during the 6-months holding period.
a. How much did you initially invest?
b. How much did you borrow from your broker?
c. What will be your rate of return if the stock price will be at Php 40 at the end of a 6-months holding period?
d. What will be your rate of return if the stock price will be at Php 55 at the end of a 6-month holding period?
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