Question
You paid cash for $1,100 worth of stock a year ago. Today the portfolio is worth $1,396. a. What rate of return did you earn
You paid cash for $1,100 worth of stock a year ago. Today the portfolio is worth $1,396.
a. What rate of return did you earn on the investment?
b. Now suppose that you brought the same stock but bought it on margin. The initial margin was 65%. Recalculate rate of return, ignoring any interest due.
c. Recalculate the rates of return for a cash purchase in the event that the stock is worth $875 today. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
d. Recalculate the rates of return for a margin purchase in the event that the stock is worth $875 today. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started