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In: Finance

An investor buys $10,000 worth of a stock priced at $10 per share using 60% initial...

An investor buys $10,000 worth of a stock priced at $10 per share using 60% initial margin. The broker charges 8% interest on the margin loan. If stock price remains unchanged, investors rate of return is

A. Positive

B. Zero

C. Negative

D. Sufficient information is not provided to answer this question

Solutions

Expert Solution

if the prices did not change it will mean that the investor will have to pay the charges of margin taken as interest from his own account and he did not have made any profits and in fact he made losses so he had a negative rate of return.

All The Other statements are false

Correct answer will be option (C)Negative.

jeff jeffy answered 2 years ago
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