Adam purchases 1,200 shares of Beta Inc. at $22 per share [inclusive of commissions] and sells them after 1 year, during which time the stock also pays a dividend. The following information is also available: Sale price = $25 Leverage ratio = 1.5 Call money rate = 5% Dividend = $0.20 per share Commission = $0.03 per share Maintenance margin = 20% Assume that the interest on the loan and the dividend are both paid at the end of the year. Adam’s return on this investment is closest to: 18.52% 19.35% 22.39% 24.52% 28.52%
Adam purchases 1,200 shares of Beta Inc. at $22 per share [inclusive of commissions] and sells them after 1 year, during which time the stock also pays a dividend. The following information is also available: Sale price = $25 Leverage ratio = 1.5 Call money rate = 5% Dividend = $0.20 per share Commission = $0.03 per share Maintenance margin = 20% Assume that the interest on the loan and the dividend are both paid at the end of the year. Adam’s return on this investment is closest to: 18.52% 19.35% 22.39% 24.52% 28.52%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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- Adam purchases 1,200 shares of Beta Inc. at $22 per share [inclusive of commissions] and sells them after 1 year, during which time the stock also pays a dividend. The following information is also available:
Sale price = $25 Leverage ratio = 1.5 Call money rate = 5%
Dividend = $0.20 per share Commission = $0.03 per share Maintenance margin = 20%
Assume that the interest on the loan and the dividend are both paid at the end of the year. Adam’s
- 18.52%
- 19.35%
- 22.39%
- 24.52%
- 28.52%
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