You purchased 250 shares of common stock on margin for $25 per share. Theinitial margin is 80%, and the stock pays no dividend. Your rate of return would beif you sell the stock at $32 per share. Ignore interest on margin.O 43%O 28%39%O 35%

The rate of return that an investor is expected to earn from the investment is termed as the…

Answered: You purchased 250 shares of common…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Y6 Consider a stock priced at $40 that pays an annual dividend of $ 1 per share. An investor purchases the stock on margin, paying $20 per share and borrowing the remainder from the brokerage firm at 10 percent annual interest. a. If, after one year, the stock is sold at a price of $60 per share, what is the return on the stock? b. If investors had used only personal funds rather than borrowing funds, what would have been the stock return?
am. 104.
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You purchased 250 shares of common stock on margin for $25 per share. The initial margin is 80%, and the stock pays no dividend. Your rate of return would be if you sell the stock at $32 per share. Ignore interest on margin. 43% 28% 39% 35%