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You have a positive opinion of IBM stock, which is currently priced at $200 per share. You believe it will be valued at $300 per
You have a positive opinion of IBM stock, which is currently priced at $200 per share. You believe it will be valued at $300 per share in one year. You have $20,000 to invest and you borrowed $15,000 on the margin from your broker for a total purchase of $35,000 of IBM stock. Your pay an interest of 11% on your borrowing. However, the stock price after one year is turns out to be $187 rather than $300 as you had predicted. What will be your net dollar return (net profit after you pay back the broker and subtract your initial investment) after one year? If your answer is negative, put the - sign before it
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