Since the margin requirement is 60 percent, you borrow (0.-4)(sso) $20 and put u
ID: 2818814 • Letter: S
Question
Since the margin requirement is 60 percent, you borrow (0.-4)(sso) $20 and put up S30. The gain on the stock is $20, but you have to pay interest of S2 (0.1 x $20) on the $20 you borrowed. The percentage return is (S20-$2)/$30-60.0%. 6. The loss is $20; the percentage return is ($20)/$50 -40%. 7. The gain is $20; the percentage return is $20/$50-40%. PROBLEMS 1. A stock sells for $10 per share. You purchase 100 shares for $10 a share (i.e., for $1,000), and after a year the price rises to $17.50. What will be the percentage return on your investment if you bought the stock on margin and the margin requirementExplanation / Answer
1a)
1b)
1c)
100%
2a)
2b)
2c)
-33%
Share price 10 No of shares 1000 Total Value 1000 Margin/Equity 250 Loan 750 Selling price 17.5 Cash inflow 1750 Gain 750 %returns 300%(750/250)