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Compute the return on the stock

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Reference no: EM13828173

Problem:

You buy a stock for $56 by paying $30 and borrowing the remaining $26 from a brokerage firm at 11 percent annualized interest. The stock pays an annual dividend of $1.20 per share, and after one year, you are able to sell it for $70. 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 sell the stock for $65 at the end of one year.

Summary

The question is from Finance and it deals with computation of return on stock. In this example, one buys stock with personal and borrowed money. Supposing that the stock gives a good return and after one year the stock is sold for profit, compute the return on the stock.

Reference no: EM13828173

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