What was the rate of return on this investment

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Reference no: EM131956125

An investor purchased 350 shares of a company at $40 per share. The stock was bought on 70 percent margin (30 percent of the purchase amount was borrowed). One month later, the investor had to pay interest on the amount borrowed at a rate of 2.5 percent per month.

At that time, the investor received a dividend of $0.40 per share.

Immediately after receiving the dividend, he sold the shares at $36 per share. The investor paid total commissions of $50 on the initial purchase and $45 on the final sale of the stock. What was the rate of return on this investment for the one-month period?

(Hint: The rate of return is equal to the percentage difference between how much the investor had to invest at the beginning while purchasing the stock and how much the investor has made while selling the stock. Do not forget the impact of dividends, commissions and interest on the borrowed amount)

Reference no: EM131956125

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