Suppose you purchase 1,350 shares of stock at $36 per share with an initial cash investment...

Suppose you purchase 1,350 shares of stock at $36 per share with an initial cash investment of $24,300. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate. Ignore dividends.

a. Calculate your return on investment one year later if the share price is $44. Suppose instead you had simply purchased $24,300 of stock with no margin. What would your rate of return have been now? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

b. Calculate your return on investment one year later if the share price is $36. Suppose instead you had simply purchased $24,300 of stock with no margin. What would your rate of return have been now? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

c. Calculate your return on investment one year later if the share price is $20. Suppose instead you had simply purchased $24,300 of stock with no margin. What would your rate of return have been now? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

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jeff jeffy answered 1 year ago

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