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What will be rate of return if the price of a stock goes up

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Reference no: EM132918477

Question 1: Suppose that stock A currently is selling at $50 per share. You buy 100 shares using $3,000 of your own money, borrowing the remainder of the investment from your broker, the maintenance margin ratio is 30%. The rate on the margin loan is 10% per year, and the commission cost is 0.5% of the transaction value. What will be your rate of return if the price of A stock goes up by 10% during the next one year? Assume that A pays $2 per share dividends during this period.

Reference no: EM132918477

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