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Investor a buys 100 shares of slm inc at 35 a share and

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Investor A buys 100 shares of SLM Inc. at $35 a share and holds the stock for a year. Investor B buys 100 shares on margin. The margin requirement is 60%, and the interest rate on borrowed funds is 8 percent. Show all work for the following:

a) What is the interest cost for Investor A?
b) What is the interest cost for Investor B?
c) If they both sell the stock for $40 after a year, what percentage return does each investor earn?
d) In both cases, the value of the stock has risen the same. Why are the percentage returns different?

Reference no: EM13575740

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