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Suppose you purchase 800 shares of stock at $61 per share with an initial cash investment of $15,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate.

Calculate your return on investment one year later if the share price is $69. Suppose instead you had simply purchased $15,000 of stock with no margin. What would your rate of return have been now?

Rate of return: ________

Without margin, Rate of return: ________

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Sixta Kovacek
Sixta KovacekLv2
28 Sep 2019

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Suppose you purchase 800 shares of stock at $61 per share with an initial cash investment of $15,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate.

Calculate your return on investment one year later if the share price is $69. Suppose instead you had simply purchased $15,000 of stock with no margin. What would your rate of return have been now?

Rate of return: ________

Without margin, Rate of return: ________

Suppose you purchase 700 shares of stock at $52 per share withan initial cash investment of $18,200. The call money rate is 5percent and you are charged a 1.5 percent premium over this rate.Ignore dividends.

a. Calculate your return on investment one yearlater if the share price is $60. Suppose instead you had simplypurchased $18,200 of stock with no margin. What would your rate ofreturn have been now? (Do not round intermediatecalculations. Enter your answers as a percent rounded to 2 decimalplaces.)

b. Calculate your return on investment one yearlater if the share price is $52. Suppose instead you had simplypurchased $18,200 of stock with no margin. What would your rate ofreturn have been now? (A negative value should be indicatedby a minus sign. Do not round intermediate calculations. Enter youranswers as a percent rounded to 2 decimal places.)

c. Calculate your return on investment one yearlater if the share price is $36. Suppose instead you had simplypurchased $18,200 of stock with no margin. What would your rate ofreturn have been now? (A negative value should be indicatedby a minus sign. Do not round intermediate calculations. Enter youranswers as a percent rounded to 2 decimal places.)

Suppose the call money rate is 6.8 percent, and you pay a spreadof 1.9 percent over that. You buy 1,200 shares at $82 per sharewith an initial margin of 70 percent. One year later, the stock isselling for $88 per share and you close out your position. What isyour return assuming no dividends are paid?

Rate of return: _____

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