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You have $ 2 0 0 0 and want to speculate on the outperformance of the technology sector over the next month. To this end,
You have $ and want to speculate on the outperformance of the technology
sector over the next month. To this end, you decide to trade an ETF that tracks the NASDAQ index. Specifically, you decide to trade the ProShares Trust ProShares UltraPro QQQ x Shares NASDAQ: TQQQ ETF, which is a levered ETF that returns times the return of the NASDAQ index eg if the NASDAQ index earns a return of this ETF earns a return of You are so convinced in the prospects of the technology sector that you also decide to trade this ETF on margin. Your broker charges an interest rate of per month for all margin trades and you decide to borrow an additional $ from your broker to execute this trade.
If the TQQQ ETF is trading at $ dollars per share on the day that you open this trade, and the NASDAQ index earns a return of over the month that you hold this position open, then what realized rate of return do you achieve on this trade?
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