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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

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Expert Solution

The prices of shares have remained unchanged so he did not make any profit but he will have to pay interest on the loan which has taken as margin from the brokerage house so he will be having a negative rate of return.

All the other options are false.

Correct answer will be option (C) Negative.

jeff jeffy answered 2 years ago
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