Mark would like to purchase a stock priced at $70. The stock is not expected to
ID: 2755278 • Letter: M
Question
Mark would like to purchase a stock priced at $70. The stock is not expected to pay any dividends inthe coming year. He can either put up the entire amount and purchase the stock, or borrow $35 from hisbrokerage firm at an annual interest rate of 12 percent and put up the remainder. Mark thinks he cansell the stock for $100 after one year
.9.If Mark does not borrow any money from his brokerage firm, what is the estimated return onthe stock?
A) 30.00 percentB) –42.86 percentC) –30.00 percentD)42.86 percentE)none of these
0. If Mark borrows from his brokerage firm, his estimated return on the stock would be _______percent.A) 42.86B) 85.71C)73.71D) 30.00
Explanation / Answer
Answer: D) 42.86%
=[(100-70)/70]*100=42.86%