Calculate the return on the stock

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Reference no: EM131230618

Buying on Margin:

Suppose that you buy a stock for $48 by paying $25 and borrowing the remaining $23 from a brokerage firm at 8 percent annualized interest. The stock pays an annual dividend of $0.80 per share, and after one year you are able to sell it for $65. Calculate your return on the stock.

Then, calculate the return on the stock if you had used only personal funds to make the purchase.

Repeat the problem assuming that only personal funds are used and that you are able to sell the stock at $40 at the end of one year.

Reference no: EM131230618

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