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Robin sold 800 shares of a non-dividend paying stock this morning for a total of $29,440....

Robin sold 800 shares of a non-dividend paying stock this morning for a total of $29,440. She had purchased these shares on margin nine months ago at a cost per share of $35. The initial margin requirement on this stock is 60 percent and the maintenance margin is 30 percent. Robin pays 1.2 percent over the call money rate of 4.9 percent. What is her total dollar return on this investment?

A. 897.29

B. 1440.00

C. 816.48

D. 1164.93

E. 931.41

Solutions

Expert Solution

Calculate dollar return on investment
Initial investment 800*35*0.6
Initial investment 16800
Amount of loan repaid (800*35*0.40)*(1+0.061)^(9/12)
Amount of loan repaid 11200*1.04541
Amount of loan repaid 11708.59
Holding period dollar return 29440-11708.59-16800
Holding period dollar return 931.41
Thus, total dollar return on this investment is $931.41

jeff jeffy answered 2 years ago
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